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					      GOVERNMENT OF MONTENEGRO




NATIONAL PROGRAM FOR INTEGRATION
              (NPI)
           2008 – 2012.




              Podgorica, June 2008.
                                                        National Program for Integration



                                                                         CONTENTS:




  SKRAĆENICE                        ABBREVIATIONS.........................................................................................................VII
  INTRODUCTION................................................................................................................................................1
1. POLITICAL CRITERIA......................................................................................................................................8
  1.1. DEMOCRACY AND RULE OF LAW..........................................................................................................9
      1.1.1. CONSTITUTION AND THE CONSTITUTIONAL LAW ........................................................................9
      1.1.2. PARLIAMENT ......................................................................................................................................9
      1.1.3. THE GOVERNMENT..........................................................................................................................14
      1.1.4. JUDICIARY.........................................................................................................................................28
      1.1.5. ANTI-CORRUPTION MEASURES......................................................................................................33
  1.2. HUMAN RIGHTS AND PROTECTION OF MINORITIES .........................................................................38
      1.2.2. ECONOMIC AND SOCIAL RIGHTS...................................................................................................51
      1.2.3. CULTURAL RIGHTS AND MINORITY PROTECTION.......................................................................55
  1.3. REGIONAL ISSUES AND INTERNATIONAL OBLIGATIONS.................................................................63
      1.3.1. REGIONAL INITIATIVES....................................................................................................................63
      1.3.2. BILATERAL RELATIONS WITH NEIGHBOURING COUNTRIES......................................................64
      1.3.3. INTERNATIONAL COMMITMENTS .................................................................................................66
  2.1. TRANSITION PROCESS IN MONTENEGRO...........................................................................................68
  2.2. EXISTENCE OF A FUNCTIONING MARKET ECONOMY .......................................................................71
      2.2.1. MACROECONOMIC STABILITY........................................................................................................71
      2.2.2. LIBERALISATION OF PRICES AND TRADE.....................................................................................84
      2.2.3. FINANCIAL SECTOR.........................................................................................................................84
      2.2.4. PRIVATISATION PROCESS..............................................................................................................89
      2.2.5. ELIMINATION OF OBSTACLES FOR MARKET ENTRY AND EXIT..................................................91
      2.2.6. ECONOMY-RELATED OWNERSHIP RIGHTS AND THE LEGAL SYSTEM ....................................93
      2.2.7. ACCELERATION OF STRUCTURAL REFORMS..............................................................................95
  2.3. CAPABILITY TO COPE WITH COMPETITIVE PRESSURE WITHIN THE EU.......................................101
      2.3.1. HUMAN CAPITAL ............................................................................................................................101
      2.3.2. PHYSICAL CAPITAL........................................................................................................................106
      2.3.3. LEVEL OF TRADE INTEGRATION WITH THE EU .........................................................................116
      2.3.4. COMPANY RESTRUCTURING AND THE SHARE OF SMALL AND MEDIUM SIZED ENTERPRISES
      ....................................................................................................................................................................119
3. ABILITY TO ASSUME OBLIGATIONS FROM THE EU MEMBERSHIP......................................................128
  3.1. FREE MOVEMENT OF GOODS ............................................................................................................129
      3.1.2. OLD APPROACH DIRECTIVES ......................................................................................................147
      3.1.3. NEW APPROACH DIRECTIVES .....................................................................................................163
  3.2. FREEDOM OF MOVEMENT OF WORKERS..........................................................................................188

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                                                            Government of Montenegro


        3.2.1. ACCESS TO LABOUR MARKET......................................................................................................188
        3.2.2. COORDINATION OF THE SOCIAL SECURITY SYSTEM...............................................................189
     3.3. RIGHT TO ESTABLISH COMPANIES AND FREEDOM TO PROVIDE SERVICES .............................193
        3.3.1. RIGHT OF ESTABLISHMENT..........................................................................................................193
        3.3.2. FREEDOM TO PROVIDE CROSS-BORDER SERVICES................................................................195
        3.3.3. POSTAL SERVICES .......................................................................................................................197
        3.3.4. INTERNATIONAL RECOGNITION OF PROFESSIONAL QUALIFICATIONS..................................199
     3.4. FREE MOVEMENT OF CAPITAL ..........................................................................................................202
        3.4.1. CAPITAL MOVEMENT AND CURRENT PAYMENTS REGIME.......................................................202
        3.4.2. PAYMENTS SYSTEM ......................................................................................................................203
        3.4.3. PREVENTION OF MONEY LAUNDERING......................................................................................206
     3.5. PUBLIC PROCUREMENT.......................................................................................................................210
        3.5.1. Status................................................................................................................................................210
        3.5.2. Short-term priorities...........................................................................................................................212
        3.5.3. Mid-term priorities.............................................................................................................................213
     3.6. COMMERCIAL LAW...............................................................................................................................214
        3.6.1. COMMERCIAL LAW.........................................................................................................................214
        3.6.2. ACCOUNTING AND AUDIT..............................................................................................................216
     3.7. INTELLECTUAL PROPERTY RIGHT.....................................................................................................219
        3.7.1. COPYRIGHT AND RELATED RIGHTS............................................................................................219
        3.7.2. INDUSTRIAL PROPERTY RIGHT....................................................................................................221
        3.7.3. ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS..........................................................224
     3.8. COMPETITION POLICY .........................................................................................................................228
        3.8.1. COMPETITION POLICY                        ...............................................................................................................228
        3.8.2. STATE AID              ...................................................................................................................................231
     3.9. FINANCIAL SERVICES...........................................................................................................................233
        3.9.1. BANKING SECTOR..........................................................................................................................233
        3.9.2. INSURANCE AND PENSION INSURANCE.....................................................................................237
        3.9.3. CAPITAL MARKET...........................................................................................................................241
     3.10. INFORMATION SOCIETY AND THE MEDIA........................................................................................250
        3.10.1. TELECOMMUNICATIONS AND INFORMATION TECHNOLOGY ...............................................250
        3.10.2. INFORMATION SOCIETY..............................................................................................................253
        3.10.3. AUDIO-VISUAL POLICY                          ............................................................................................................256
     3.11. AGRICULTURE AND RURAL DEVELOPMENT..................................................................................262
        3.11.1. MARKET REGULATION AND DIRECT PAYMENTS ....................................................................263
        3.11.2. RURAL DEVELOPMENT POLICY..................................................................................................268
        3.11.3. PAYING AGENCY AND FINANCING OF COMMON AGRICULTURAL POLICY...........................271
        3.11.4. HORIZONTAL ISSUES...................................................................................................................273
     3.12. FOOD SAFETY, VETERINARY AND PHYTOSANITARY POLICIES .................................................279
        3.12.1. FOOD SAFETY ..............................................................................................................................279

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                                                  National Program for Integration


   *Financial needs of:....................................................................................................................................284
   Phytosanitary Directorate given in Table 1 Chapter 3.12.4.........................................................................284
   Veterinary Directorate given in Table 1 Chapter 3.12.2.7...........................................................................284
   Health Protection Sector of the Ministry of Health, Labour and Social Welfare given in Tables 1 and 2 of the
   Chapter 3.28.2............................................................................................................................................284
   3.12.2. VETERINARY POLICY ..................................................................................................................284
   3.12.3. PHYTOSANITARY POLICY ...........................................................................................................291
3.13. FISHERIES ...........................................................................................................................................300
   3.13.1. Status..............................................................................................................................................300
   3.13.2. SHORT-TERM PRIORITIES ..........................................................................................................301
   3.13.3. MID-TERM PRIORITIES ................................................................................................................302
3.14. TRANSPORT POLICY..........................................................................................................................303
   3.14.1. ROAD TRANSPORT.......................................................................................................................303
   3.14.2. RAILWAY TRANSPORT ................................................................................................................306
   3.14.3. COMBINED TRANSPORT .............................................................................................................310
   3.14.4. MARITIME TRANSPORT .............................................................................................................313
   3.14.5. AIR TRANSPORT...........................................................................................................................316
3.15. ENERGY................................................................................................................................................320
   3.15.1. SECURITY OF SUPPLY.................................................................................................................321
   3.15.1.1. Status...........................................................................................................................................321
   3.15.2. ENERGY MARKET.........................................................................................................................322
   3.15.2.1. Status ..........................................................................................................................................322
   3.15.3. ENERGY EFFICIENCY AND RENEWABLE ENERGY SOURCES................................................324
   3.15.3.1. Status ..........................................................................................................................................324
   3.15.3.4. Employment plan.........................................................................................................................326
   3.15.3.5. Financial requirements.................................................................................................................327
   3.15.4. NUCLEAR SAFETY AND RADIATION PROTECTION ..................................................................327
3.16. TAXATION.............................................................................................................................................333
   3.16.1. TAX POLICY...................................................................................................................................333
   3.16.2. DIRECT TAXATION........................................................................................................................333
   3.16.3. INDIRECT TAXATION ..................................................................................................................335
   3.16.4. MUTUAL ASSISTANCE..................................................................................................................339
   3.16.5. TAX ADMINISTRATION ................................................................................................................340
3.17. ECONOMIC AND MONETARY POLICY ..............................................................................................344
   3.17.1. GENERAL GUIDELINES ...............................................................................................................344
   3.17.2. MONETARY POLICY......................................................................................................................344
   3.17.3. ECONOMIC POLICY......................................................................................................................351
3.18. STATISTICS..........................................................................................................................................355
   3.18.1. DEMOGRAPHIC-SOCIAL POLICY.................................................................................................358
   3.18.2. STATISTICAL DATA ON ENVIRONMENT ...................................................................................361


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                                                        Government of Montenegro


     3.18.3. MACROECONOMIC STATISTICS.................................................................................................363
     3.18.4. BUSINESS STATISTICS................................................................................................................366
     3.18.5. MONETARY, FINANCIAL AND TRADE STATISTICS AND THE STATISTICS OF THE BALANCE
     OF PAYMENTS .........................................................................................................................................368
     3.18.6. AGRICULTURAL STATISTICS.......................................................................................................372
     3.18.7. REGISTERS...................................................................................................................................374
     3.18.8. CLASSIFICATIONS........................................................................................................................375
 3.19. SOCIAL POLICY AND EMPLOYMENT................................................................................................378
     3.19.1. LABOUR LEGISLATION.................................................................................................................378
     3.19.2. HEALTH AND SAFETY CONDITIONS AT WORKPLACE .............................................................381
     3.19.3. SOCIAL DIALOGUE.......................................................................................................................386
     3.19.4. EMPLOYMENT AND EUROPEAN SOCIAL FUND .......................................................................389
     3.19.5. SOCIAL INCLUSION......................................................................................................................395
     3.19.6. SOCIAL SECURITY........................................................................................................................403
     3.19.7. ANTI-DISCRIMINATION AND EQUAL OPPORTUNITIES ............................................................405
 3.20. ENTREPRENEURIAL AND INDUSTRIAL POLICY ............................................................................411
     3.20.1. INDUSTRIAL POLICY.....................................................................................................................411
     3.20.2. PRIVATIZATION AND RESTRUCTURING ...................................................................................414
     3.20.3. BUSINESS ENVIRONMENT..........................................................................................................417
     3.20.4. SMALL AND MEDIUM SIZED ENTERPRISES POLICY................................................................422
 3.21. TRANS-EUROPEAN NETWORKS.......................................................................................................428
     3.21.1. TRANS-EUROPEAN TRANSPORT NETWORKS..........................................................................428
     3.21.2. TRANS EUROPEAN ENERGY NETWORK...................................................................................431
 3.22. REGIONAL POLICY AND COORDINATION OF STRUCTURAL INSTRUMENTS..............................433
     3.22.1. Status .............................................................................................................................................433
     3.22.2. Short-term priorities.........................................................................................................................434
     3.22.3. Mid-term priorities...........................................................................................................................437
 3.23. COOPERATION IN FIELD OF JUDICIARY AND FUNDAMENTAL RIGHTS.......................................439
     3.23.1. JUDICIAL SYSTEM .......................................................................................................................439
     3.23.2. ANTI-CORRUPTION POLICY........................................................................................................449
     3.23.3. FUNDAMENTAL RIGHTS ..............................................................................................................454
 3.24. JUSTICE, FREEDOM AND SECURITY................................................................................................467
     3.24.1. EXTERNAL BORDERS..................................................................................................................467
     3.24.2. EXTERNAL MIGRATIONS ............................................................................................................470
     3.24.3. VISA POLICY .................................................................................................................................472
     3.24.4. ASYLUM.........................................................................................................................................473
     3.24.5. POLICE COOPERATION AND FIGHT AGAINST ORGANIZED CRIME .......................................477
     3.24.6. FIGHT AGAINST TERRORISM......................................................................................................482
     3.24.7. COOPERATION IN FIELD OF NARCOTICS..................................................................................485
     3.24.8. CUSTOMS COOPERATION...........................................................................................................487


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                                                 National Program for Integration


   3.24.9. JUDICIAL COOPERATION IN CIVIL AND CRIMINAL MATTERS..................................................491
3.25. SCIENCE AND RESEARCH.................................................................................................................497
   3.25.1 STATUS...........................................................................................................................................497
3.26. EDUCATION AND CULTURE...............................................................................................................500
   3.26.1. EDUCATION AND TRAINING........................................................................................................500
   3.26.2. CULTURE.......................................................................................................................................508
3.27. ENVIRONMENT....................................................................................................................................516
   3.27.1. HORIZONTAL LEGISLATION........................................................................................................517
   3.27.2. AIR QUALITY AND CLIMATE CHANGES......................................................................................522
   3.27.3. WASTE MANAGEMENT.................................................................................................................526
   3.27.4. WATER MANAGEMENT................................................................................................................529
   3.27.5. NATURE CONSERVATION............................................................................................................532
   3.27.6. INDUSTRIAL POLLUTION, RISKS AND ACCIDENTS CONTROL................................................536
   3.27.7. GENETICALLY MODIFIED ORGANISMS......................................................................................538
   3.27.8. CHEMICALS...................................................................................................................................540
   3.27.9. NOISE PROTECTION....................................................................................................................543
   3.27.10. FORESTRY..................................................................................................................................545
   3.27.11. SEA AND THE COASTAL ZONE..................................................................................................550
3.28. HEALTH CARE AND CONSUMER PROTECTION ............................................................................555
   3.28.1. CONSUMER PROTECTION .........................................................................................................555
   3.28.2. PUBLIC HEALTH .........................................................................................................................558
3.29. CUSTOMS UNION ...............................................................................................................................565
   3.29.1. STATUS..........................................................................................................................................565
   3.29.2. Short-term priorities ........................................................................................................................569
   3.29.3. Mid-term priorities .........................................................................................................................569
3.30. FOREIGN RELATIONS.........................................................................................................................572
   3.30.1. INTERNATIONAL ECONOMIC RELATIONS.................................................................................572
   3.30.2. DEVELOPMENT COOPERATION AND HUMANITARIAN ASSISTANCE.....................................576
3.31. FOREIGN, SECURITY AND DEFENCE POLICY.................................................................................578
   3.31.1. POLITICAL DIALOGUE WITH EU..................................................................................................578
   3.31.2. COOPERATION WITH INTERNATIONAL ORGANIZATIONS.......................................................579
   3.31.3. WEAPONS CONTROL...................................................................................................................583
   3.31.4. IMPLEMENTATION OF RESTRICTIVE MEASURES AND ECONOMIC SANCTIONS..................589
   3.31.5. COMBATING TERRORISM............................................................................................................590
   3.31.6. EUROPEAN SECURITY AND DEFENSE POLICY........................................................................591
   3.31.7. VISA SYSTEM................................................................................................................................593
3.32. FINANCIAL CONTROL.........................................................................................................................595
   3.32.1. EXTERNAL (STATE) AUDIT..........................................................................................................595
   3.32.2. INTERNAL AUDIT...........................................................................................................................598
   3.32.3. PUBLIC INTERNAL FINANCIAL CONTROL (PIFC).......................................................................601

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                                                        Government of Montenegro


  3.33. FINANCIAL AND BUDGET PROVISIONS............................................................................................604
4. ADMINISTRATIVE JUDICIAL CAPACITIES FOR IMPLEMENTATION OF ACQUIS COMMUNAUTAIRE 606
  4.1. ADMINISTRATIVE CAPACITIES ...........................................................................................................607
     4.1.1. PUBLIC ADMINISTRATION REFORM ............................................................................................607
     4.1.2. INSTITUTIONAL BUILDING.............................................................................................................613
     4.1.3. TRAININGS......................................................................................................................................621
  4.2. JUDICIAL CAPACITIES .........................................................................................................................625
     4.2.1. JUDICIAL REFORM .........................................................................................................................625
  4.3. PLANNED GROWTH OF THE ADMINISTRATIVE CAPACITIES..........................................................640
5. NATIONAL VERSION OF THE ACQUIS COMMUNAUTAIRE.....................................................................641
  5.1.STATUS....................................................................................................................................................642
  5.2. PREPARATION OF NATIONAL VERSION OF THE ACQUIS COMMUNAUTAIRE..............................643
     5.2.1. Short-term priorities ..........................................................................................................................644
     5.2.2. Mid-term priorities ............................................................................................................................645
6. FINANCIAL ASSESSMENT OF NPI IMPLEMENTATION............................................................................646
  6.1. FINANCIAL ASSESSMENT ...................................................................................................................647


ANNEX 1 – ADMINISTRATIVE CAPACITIES PLAN FOR MONTENEGRIN INSTITUTIONS .………….……..626


ANNEX 2 – FRAMEWORK FINANCIAL ASSESSMENT FOR INSTITUTIONS ……………….……..………….635




VI
                                   National Program for Integration



SKRAĆENICE                                                                            ABBREVIATIONS

          MINISTARSTVA                                        MINISTRIES
          Ministarstvo saobraćaja, pomorstva i                Ministry of Maritime Affairs, Transportation and
MSPT
          telekomunikacija                                    Telecommunication
                                                              Ministry of Tourism and Environmental
MTZZS     Ministarstvo turizma i zaštite životne sredine
                                                              Protection
MF        Ministarstvo finansija                              Ministry of Finance
MIP       Ministarstvo inostranih poslova                     Ministry of Foreign Affairs
MKSM      Ministarstvo kulture, sporta i medija               Ministry of Culture, Sports and Media
MO        Ministarstvo odbrane                                Ministry of Defence
          Ministarstvo poljoprivrede, šumarstva i             Ministry of Agriculture, Forestry and Water
MPSV
          vodoprivrede                                        Management
MP        Ministarstvo pravde                                 Ministry of Justice
MPN       Ministarstvo prosvjete i nauke                      Ministry of Education and Science
                                                              Ministry of Interior Affairs and Public
MUPiJU    Ministarstvo unutrašnjih poslova i javne uprave
                                                              Administration
MER       Ministarstvo za ekonomski razvoj                    Ministry for Economic Development
          Ministarstvo za zaštitu ljudskih i manjinskih       Ministry for Human and Minority Rights
MZLMP
          prava                                               Protection
MZRSS     Ministarstvo zdravlja, rada i socijalnog staranja   Ministry of Health, Labour and Social Welfare
          SEKRETARIJATI                                       SECRETARIATS
SEI       Sekretarijat za evropske integracije                Secretariat for European Integration
SZR       Sekretarijat za razvoj                              Secretariat for Development
SZZ       Sekretarijat za zakonodavstvo                       Secretariat for Legislation
          UPRAVE                                              ADMINISTRATIONS
PU        Poreska uprava                                      Tax Administration
UZN       Uprava za nekretnine                                Real-Estate Administration
UC        Uprava carina                                       Customs Administration
UZPS      Uprava za pomorsku sigurnost                        Maritime Security Administration
VU        Veterinarska uprava                                 Veterinary Administration
UZA       Uprava za antikorupcijsku inicijativu               Administration for Anti-Corruption Initiative
          Uprava za sprečavanje pranja novca i                Administration for Prevention of Money
UZSPN
          finansiranje terorizma                              Laundering and financing of Terrorism
UZS       Uprava za šume                                      Forestry Administration
UZV       Uprava za vode                                      Water Management Administration
UZK       Uprava za kadrove                                   Human Resources Management Administration
UP        Uprava policije                                     Police Administration
                                                              Administration for Pharmaceuticals and Medical
UZLJIMS   Upravu za ljekove i medicinska sredstva
                                                              Devices
UZCV      Uprava za civilno vazduhoplovstvo                   Civil Aviation Administration
UZK       Uprava za zaštitu konkurencije                      Competition Protection Administration

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                                    Government of Montenegro



UZIS      Uprava za igre na sreću                           Administration for System of Chance Games
          ZAVODI                                            OFFICES
ZZIS      Zavod za intelektualnu svojinu                    Office for Intellectual Property Rights
ZIKS      Zavod za izvršenje krivičnih sankcija             Office for Criminal Sanction Execution - Prison
          Zavod za međunarodnu naučnu, prosvjetno           Office for International Science, Education,
ZAMTES
          kulturnu i tehničku saradnju                      Cultural and Technical Cooperation
ZZM       Zavod za metrologiju                              Metrology Office
ZZSKOL    Zavod za školstvo                                 Education Office
ZZS       Zavod za standardizaciju                          Standardization Office
MONSTAT   Zavod za statistiku                               Bureau of Statistics
ZZT       Zavod za transfuziju                              Office for Blood Transfusion
ZZZ       Zavod za zapošljavanje                            Employment Office
ZZZI      Zavod za zbrinjavanje izbjeglica                  Office for Care of Refugees
HZ        Hidrometeorološki zavod                           Hydro-Meteorology Office
SZ        Seizmološki zavod                                 Seismology Office
DACG      Državni arhiv Crne Gore                           State Archive of Montenegro
          DIREKCIJE                                         DIRECTORATES
DJR       Direkcija javnih radova                           Directorate of Public Works
DZINS     Direkcija za igre na sreću                        Directorate for Games of Chances
DZJN      Direkcija za javne nabavka                        Directorate for Public Procurement
                                                            Directorate for Development of Small and
DZRMSP    Direkcija za razvoj malih i srednjih preduzeća
                                                            Medium Enterprises
DZS       Direkcija za saobraćaj                            Directorate for Transport
          AGENCIJE                                          AGENCIES
          Agencija za telekomunikacije i poštansku          Agency for Telecommunications and Postal
AGENTEL
          djelatnost                                        Services
AZD       Agencija za duvan                                 Agency for Tobacco
AZNB      Agencija za nacionalnu bezbjednost                Agency for National Security
          Agencija za prestrukturiranje privrede I strana   Agency for Restructuring of Economy and
AZPP
          ulaganja                                          Foreign Investments
          Agencija za promociju stranih investicija Crne
MIPA                                                        Montenegrin Investment Promotion Agency
          Gore
AZZPOL    Agencija za zaštitu podataka o ličnosti           Agency for Personal Data Protection
AZZS      Agencija za zaštitu životne sredine               Environment Protection Agency
          JAVNE USTANOVE                                    PUBLIC INSTITUTIONS
          Centar za profesionalno savjetovanje i
CIPS                                                        Centre for Professional Advices and Information
          informisanje
CETI      Centar za ekotoksikološka istraživanja            Centre for Eco-Toxicological Research
          OSTALE ORGANIZACIJE U CRNOJ GORI                  OTHER ORGANIZATIONS IN MONTENEGRO
CDA       Centralna depozitarna agencija                    Central Depository Agency
CRPS      Centralni registar privrednog suda                Central Registry of Commercial Court

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                                   National Program for Integration



DRI         Državna revizorska institucija                        State Audit Institution
HT          Haški tribunal                                        The Hague Tribunal
CANU        Crnogorska akademija nauka i umjetnosti               Montenegrin Academy of Science and Arts
            MEĐUNARODNE ORGANIZACIJE I                            INTERNATIONAL ORGANIZATIONS AND
            INSTITUCIJE                                           INSTITUTIONS
BIS         Banka za međunarodna poravnanja                       Bank for International Settlements
BSEC        Crnomorska ekonomska saradnja                         Black Sea Economic Cooperation
ABC         Asocijacija balkanskih privrednih komora              Association of Balkan Chambers of Commerce
CAFAO       Kancelarija za carinsku i poresku podršku             Customs and Fiscal Assistance Office
CEN         Evropski Komitet za standardizaciju u                 European Committee for Electrotechnical
(CENELEC)   elektrotehnici                                        Standardization
CFCU        Centralna jedinica za finansije i ugovore             Central Finance and Contracts Unit
CILC        Centar za međunarodnu pravnu saradnju                 Centre for International Legal Cooperation
            Ženevski centar za demokratsku kontrolu               Geneva Centre for the Democratic Control of
DCAF
            oružanih snaga                                        Armed Forces
DHP         Odjeljenje za zdravstvena zanimanja                   Department of Health Professions
EAR         Evropska agencija za rekonstrukciju                   European Agency for Reconstruction
            Evropski biro asocijacija biblioteka, informacija i   European Bureau of Library, Information and
EBLIDA
            dokumentacije                                         Documentation Associations
EEA         Evropska agencija za životnu sredinu                  European Environmental Agency
EMSA        Evropska agencija za pomorsku sigurnost               European Maritime Safety Agency
EP          Evropski parlament                                    European Parliament
EPER        Evropski registar emisije zagađivača                  European Pollutant Emission Register
EPO         Evropska organizacija za patente                      European Patent Organization
ERA/MORE    Evropska mreža mobilnih centara                       European Network of Mobility Centres
ESCB        Evropski sistem centralnih banaka                     European System of Central Bank
            Evropski institut za standarde u                      European Telecommunications Standards
ETSI
            telekomunikacijama                                    Institute
ETUC        Evropska konfederacija sindikata                      European Trade Unions Confederation
EUROCONT    Evropska organizacija za bezbjednost vazdušne
                                                                  European Organization for Aviation Security
ROL         plovidbe
ECE         Ekonomska komisija za Evropu                          Economic Commission for Europe
EA          Evropska kooperacija za akreditaciju                  European Accreditation
GAERC       Savjet za opšte poslove i spoljne odnose              General Affairs and External Relations Council
            Globalna organizacija parlamentaraca protiv           Global Organization of Parliaments Against
GOPAC
            korupcije                                             Corruption
GRECO       Grupa država protiv korupcije                         Group of States Against Corruption
GTZ         Njemačka organizacija za tehničku saradnju            German Organization for Technical Cooperation
IAEA        Međunarodna agencija za atomsku energiju              International Atomic Energy Agency
            Odbor za međunarodne računovodstvene
IASB                                                              International Accounting Standards Board
            standarde


                                                                                                               IX
                                    Government of Montenegro



           Međunarodna organizacija civilnog
ICAO                                                          International Civil Aviation Organization
           vazduhoplovstva
ICOM       Međunarodni savjet muzeja                          The International Council of Museums
IEC        Međunarodna komisija za elektrotehniku             International Electro technical Commission
IFC        Međunarodna finansijska korporacija                International Financial Corporation
           Međunarodna federacija pokreta organske            International Federation of Organic Agriculture
IFOAM
           poljoprivrede                                      Movements
                                                              International Federation of the Phonographic
IFPI       Međunarodna federacija fonografske industrije
                                                              Industry
           Međunarodna organizacija za akreditaciju           International Laboratory Accreditation
ILAC
           laboratorije                                       Organisation
ILO        Međunarodna organizacija rada                      International Labour Organization
           Mađunarodna kriminalistička policijska
INTERPOL                                                      INTERPOL
           organizacija
           Svjetska organizacija državnih revizorskih         International Organization of Supreme Audit
INTOSAI
           institucija                                        Institution
IOM        Međunarodna organizacija za migracije              International Organization for Migration
UN         Ujedinjene nacije                                  United Nations
                                                              United Nations Commission on International
UNCITRAL   UN Komisija za međunarodno trgovačko pravo
                                                              Trade Law
                                                              United Nations Division for Sustainable
UNCSD      UN Odsjek za održivi razvoj
                                                              Development
UNDP       UN Program za razvoj                               United Nations Development Programme
                                                              United Nations Economic Commission for
UNECE      UN Ekonomska komisija za Evropu
                                                              Europe
UNEP       UN Program za zaštitu životne sredine              United Nations Environment Programme
                                                              United Nations Educational, Scientific and
UNESCO     UN Organizacija za obrazovanje, nauku i kulturu
                                                              Cultural Organization
                                                              United Nations Industrial Development
UNFCCC     UN Organizacija za industrijski razvoj
                                                              Organization
                                                              United Nations High Commissioner for
UNHCR      UN Visoki predstavnik za izbjeglice
                                                              Refugees
UNICEF     UN Fond za djecu                                   United Nations Children's Fund
           Međunarodni institut za unifikaciju građanskog     International Institute for the Unification of
UNIDROIT
           prava                                              Private Law
           UN Privremena administrativna misija na            United Nations Interim Administration Mission in
UNMIK
           Kosovu                                             Kosovo
UNODC      Kancelarija UN za borbu protiv droge i kriminala   United Nations Office on Drugs and Crime
           OSTALE SKRAĆENICE                                  OTHER ABBREVIATIONS
           Sporazum o snadbijevanju i individualnim
ACSA                                                          Acquisition and Cross Servicing Agreement
           uslugama
                                                              European Agreement concerning the
           Evropski sporazum od međunarodnom prevozu
ADN                                                           International Carriage of Dangerous Goods by
           opasnih materija unutrašnjim vodama
                                                              Inland Waterways
ADR        Propisi za prevoz drumovima                        Road Transport Regulations

X
                                       National Program for Integration



                 Finansijska i tehnička podrška trećim zemljama   Financial and Technical Assistance to Third
AENEAS
                 u oblasti migracija i azila                      Countries in the Field of Migration and Asylum
AMIS             Agrarni marketinški informacioni sistem          Agrarian Marketing Information System
APD              Anketa o potrošnji domaćinstva                   Survey on Household Consumption
                                                                  Committee for Intellectual Property Rights
APK              Komitet za zaštitu intelektualne svojine
                                                                  Protection
APLOMB           Aktivno praćenje tehnološke infrastrukture u     Active Traceability Technological Infrastructures
                 interaktivnim procesima između unutrašnje i      in Interaction Processes between Indoor and
                 spoljne sredine                                  Outdoor Environments
ASA              Organizacija za primijenjenu nauku i analize     Applied Science and Analysis Inc.
                                                                  Agreement on the International Carriage of
ASOR             Sporazum o međunarodnom prevozu putnika
                                                                  passengers
AVMS             Usluge u audiovizuelnim medijima                 Audiovisual Media Services
AWB              Ugovor o prevozu u vazdušnom saobraćaju          Air Waybill
B/L              Ugovor o prevozu u pomorskom saobraćaju          Bill of Lading
BIP              Granični punkt                                   Border Inspection Posts
BSI statistics   Statistika pozicija bilansa stanja banaka        Balance Sheet Statistics
BTWC             Konvencija o zabrani bakteriološkog oružja       Biological and Toxin Weapons Convention
BWPS             Bukureštanska svjetska poštanska strategija      Bucharest World Postal Strategy
CAO              Službenik nadležan za akreditaciju               Competent Accrediting Officer
CAP              Akcioni plan zemlje                              Country Action Plan
CAP              Zajednička poljoprivredna politika               Common Agricultural Policy
                 Podrška Evropske zajednice za rekonsktrukciju,   Community Assistance for Reconstruction,
CARDS
                 razvoj i stabilizaciju                           Development and Stabilisation
                 Simpozijum o hemisjkim i biološkim medicinskim   The Chemical and Biological Medical
CBMTS
                 tretmanima                                       Treatments Symposia
                 Konvencija o zabrani određenih konvencionalnih   Convention on Prohibitions or Restrictions on
CCW
                 oružja                                           the Use of Certain Conventional Weapons
CDM              Mehanizam čistog razvoja                         Clean Development Mechanism
CDP              Program razvoja kapaciteta                       Capacity Development Program
CE               Evropski standard                                Conformite Europeane
                 Konvencija o eliminaciji svih oblika             Convention on Elimination of Discrimination of
CEDAW
                 diskriminacije žena                              Women
CEFTA            Centralnoevropski ugovor o slobodnoj trgovini    Central Europe Free Trade Agreement
CEI              Centralna evropska inicijativa                   Central European Initiative
CELEX            Pravo Evropske zajednice                         Communitatis Europeae lex
CES              Crnomorska ekonomska saradnja                    Black Sea Economic Cooperation
                 Plan konačne eliminacije
CFC                                                               CFC Elimination Plan
                 hloroflorougljovodonika
CHP              Kombinovana toplota i snaga                      Combined Heat and Power
CHU              Centralna jedinica za harmonizaciju              Central Harmonisation Unit
CIM              Ugovor o prevozu u željezničkom saobraćaju       Contract for International Carriage of Goods by


                                                                                                               XI
                                   Government of Montenegro



                                                         Rail
                                                         Competitiveness and Innovation Framework
CIP      Program konkurentnosti i inovacija
                                                         Programme
         Konvencija o međunarodnoj trgovini ugroženim    Convention on International Trade in
CITES
         vrstama divlje flore i faune                    Endangered Species of Wild Flora and Fauna
CLDP     Program razvoja privrednog prava                Commercial Law Development Program
CMEP     Civilno vojno planiranje NATO-a                 Civil Military Emergency Preparedness
         Konvencija o ugovoru za međunarodni prevoz      Convention on International Auto
CMR
         robe drumom                                     Transportations Treaty
                                                         Classification of Individual Consumption by
COICOP   Klasifikacija lične potrošnje prema namjeni
                                                         Purpose
         Konvencija o međunarodnom prevozu               Convention concerning International Carriage by
COTIF
         željeznicom                                     Rail
         Konvencija o fizičkoj zaštiti nuklearnog        Convention on the Physical Protection of
CPPNM
         materijala                                      Nuclear Material
CRD      Direktiva o zahtjevima za kapitalom             Capital Requirements Directive
CTBT     Konvencija o zabrani nuklearnih proba           Comprehensive Nuclear Test Ban Treaty
         Konvencija o ugovoru o međunarodnom             Convention on International Auto Transportation
CVR
         drumskom prevozu putnika i prtljaga             of Passengers and Luggage Treaty
CWC      Konvencija o zabrani hemijskog oružja           Chemical Weapons Convention
DBOT     Projektovanje, izgradnja, rad i transfer        Design Build Operate Transfer
DIS      Decentralizovani sistem implementacije          Decentralised Implementation System
DKP      Diplomatsko-konzularno predstavništvo           Diplomatic Missions and Consular Post
DLP      Pravilnik o dobroj laboratorijskoj praksi       Manual on Good Laboratory Practices
DNS      Sistem poravnanja u odloženom vremenu           Delayed Net Settlement
EAP      Evropski administrativni prostor                European Administrative Space
         Evropski biro bibliotečkih, informacionih i     European Bureau of Library, Information and
EBLIDA
         dokumentacionih asocijacija                     Documentation Associations
EC       Elektronsko poslovanje                          Electronic Commerce
         Sporazum o zajedničkoj evropskoj oblasti
ECAA                                                     European Common Aviation Area Agreement
         letjenja
         Pristupna mreža za pridržavanje i sprovođenje   Environmental Compliance and Enforcement
ECENA
         propisa za zaštitu životne sredine              Network for Accession
EEA      Evropska ekonomska oblast                       European Economic Area
EICC     Euro info korespodentni centar                  Euro Info Correspondence Centre
         Evropski inventar postojećih komercijalnih      European Inventory of Existing Commercial
EINECS
         hemijskih supstanci                             Chemical Substances
EIP      Program preduzetništva i inovacija              Entrepreneurship and Innovation Programme
         Sistem upravljanja zaštitom životne sredine i   Environment Monitoring and Assessment
EMAS
         provjere                                        System
EMC      Elektromagnetna kompatibilnsot                  Electromagnetic Compatibility
         Konvencija UNECE o prekograničnom               Convention on Long-range Tran boundary Air
EMEP
         zagađivanju vazduha na velikim udaljenostima    Pollution


XII
                                         National Program for Integration



ENIC       /   Nacionalni informacioni centar za priznavanje       National Academic Recognition Information
NARIC          visokoškolskih kvalifikacija                        Centre
EPCG           Elektroprivreda Crne Gore                           Electric Power Company of Montenegro
ERA            Evropski istraživački prostor                       European Research Area
                                                                   European Collaboration in Measurement
EURAMET        Evropska saradnja u mjernim standardima
                                                                   Standards
FADN           Mreža podataka o poljoprivrednim računima           Farm Accounting Data Network
FATF           Radna grupa zza finansijsku akciju                  Financial Action Task Force
FSAP           Program procjene finansijskog sektora               Financial Sector Assessment Program
FWC            Okvirni ugovor                                      Framework contract
GATT           Opšti sporazum o carinama i trgovini                General Agreement on Tariffs and Trade
GEF            UNDP Fond za globalnu zaštitu životne sredine       Global Environment Facility
GIS            Geografski informacioni sistem                      Geographic Information System
GMO            Genetski modifikovani organizam                     Genetically Modified Organism/
HACCP          Sistem upravljanja kvalitetom i higijenom           Hazard Analysis and Critical Control Points
               Haški kodeks ponašanja protiv širenja balističkih   Hague Code of Conduct Against Ballistic Missile
HCOC
               projektila                                          Proliferation
IACS           Integrisani sistem administracije i kontrole        Integrated Administration and Control System
IASB           Međunarodna federacija računovođa                   International Accounting Standard Board
IBAN           Međunarodni bankarski račun                         International Bank Account Number
IBM            Integrisano upravljanje granicama                   Integrated Border Management
ICT            Informaciona komunikaciona tehnologija              Information and Communications Technology
IES            Međunarodni standard obuke                          International Education Standard
IOC            Indijska naftna korporacija                         Indian Oil Corporation
IONAS          Saradnja luka i gradova jadranske i jonske
                                                                   IONAS Project
projekat       regije
               Međunarodna organizacija komisija za hartije od     International Organisation of Securities
IOSCO
               vrijednosti                                         Commissions
IPA            Instrument za predpristupnu pomoć                   Instrument for Pre-accession Assistance
IPAP           Akcioni plan individualnog partnerstva              Individual Partnership Action Plan
               Instrument za predpristupnu pomoć seoskom           Instrument for Pre-accession Assistance for
IPARD
               razvoju                                             Rural Development
IPCC           Mađuvladin panel UN o klimatskim promjenama         Intergovernmental Panel on Climate Change
IPP            Individualni program partnerstva                    Individual Partnership Program
IPU            Međuparlamentarna unija                             Inter-Parliamentary Union
IRC            Inovativni relej centar                             Innovation Relay Centre
IRD            Međunarodna pomoć i razvoj                          International Relief and Development
IRI            Ocjena indeksa investicionih reformi                Investment Reform Index
               Međunarodna standardna klasifikacija                International Standard Classification of
ISCED
               obrazovanja                                         Education
ISO            Svjetska organizacija za standardizaciju            International Organization for Standardization

                                                                                                              XIII
                                           Government of Montenegro



ISZZ/HCIS       Informacioni sistem zdravstvene zaštite                Health Care Information System
IT              Informaciona tehnologija                               Information Technology
                Carinska konvencija o međunarodnom tranzitu            Conventionon the International Transport of
ITI / TIR
                robe                                                   Goods
IUS             Jugoslovenski standard                                 Yugoslav Standard
JAA             Pravila udruženih vazduhoplovnih vlasti Evrope         Joint Aviation Authorities Rules
JCI             Jedinstvena carinska ispostava                         Unique Customs Office
JJI             Jadransko-jonska inicijativa                           Adriatic-Ionian Initiative
JUAT            Jugoslovensko akreditaciono tijelo                     Yugoslav Accreditation Body
JZU             Javno-zdravstvena ustanova                             Public Health Institution
KAP             Kombinat aluminijuma Podgorice                         Aluminium Plan Podgorica
JVD / KAU       Jedinica prema vrsti djelatnosti                       Kind-of-Activity Unit
                Konvencija UNECE o prekograničnom                      Convention on Long-Range Transboundary Air
CLRTAP
                zagađivanju vazduha na velikim udaljenostima           Pollution
LPIS            Informacioni sistem o zemljišnim parcelama             Land Parcel Information System
MAG-            Multinacionalna savjetodavna grupa - Centar za         Multinational Advisory Group-Centre for Security
RACVIAC         bezbjedonosnu saradnju                                 Cooperation
MAP             Akcioni plan za članstvo u NATO                        Membership Action Plan (for NATO)
MAP             Višegodišnji plan                                      Multi Annual Plan
                Regionalna inicijativa za migracije, azil i izbjegla
MARRI                                                                  Migration, Asylum, Refugees Regional Initiative
                i raseljena lica
MEIS            Crnogorski prosvjetni informacioni sistem              Montenegrin Education Information System
MID             Direktiva o mjernim instrumentima                      Measuring Instruments Directive
MiFD            Direktiva o tržištima finansijskih instrumenata        Markets in Financial Instruments Directive
                Agencija za promociju stranih investicija Crne
MIPA                                                                   Montenegrin Investment Promotion Agency
                Gore
MIR             Monetarne kamatne stope                                Monetary Interest Rates
MKB / ICD       Međunarodna klasifikacija bolesti                      International Classification of Diseases
MKZD        /                                                          International Commission for the Protection of
                Međunarodna komisija za zaštitu Dunava
ICPDR                                                                  the Danube River
                Distributivni servis preko više kanala i više
MMDS                                                                   Multichannel Multipoint Distribution Service
                učesnika
MMF             Međunarodno-monetarni fond                             International Monetary Fund
                Program razvoja kapaciteta za demilitarizaciju i
MONDEM          sigurno skladištenje lakog naoružanja i                Montenegro Demilitarization Program
                konvencionalne municije
                                                                       Committee of Experts on the Evaluation of Anti-
                Komitet savjeta Evrope za sprječavanje pranja
MONEYVAL                                                               Money Laundering Measures and Financing of
                novca i finansiranje terorizma
                                                                       Terrorism
MOR / ILO       Međunarodna organizacija rada                          International Labour Organization
                                                                       Protocol on Prohibitions of the Use of Antitank
MOTAM           Protokol o zabrani upotrebe protivoklopnih mina
                                                                       Mines
MRL             Maksimalni nivo rezidua                                Maximal Residue Level

XIV
                                     National Program for Integration



MRS / IAS     Međunarodni računovodstveni sistem                   International Accounting System
              Međunarodni standard finansijskog
MSFI / IFRS                                                        International Financial Reporting Standards
              izvještavanja
MSP / SME     Mala i srednja preduzeća                             Small and Medium Enterprises
MSR / ISA     Međunarodni standard za reviziju                     International Standards on Auditing
MTCR          Režim kontrole raketne tehnologije                   Missile Technology Control Regime
NACE          Nacionalna asocijacija koledža i poslodavaca         National Association of Colleges and Employers
NAO           Nacionalni službenik za ovjeravanje                  National Authorising Officer
              Nacionalni akcioni plan za postizanje rodne
NAP                                                                National Action Plan for Gender Equality
              ravnopravnosti
NAP           Nacionalni akcioni plan                              National Action Plan
              Nacionalni informacioni centar za priznavanje        National Academic Recognition Information
NARIC
              diploma                                              Centre
NATO          Sjevernoatlantski savez                              North Atlantic Treaty Organization
NCB           Nacionalni centralni biro                            National Central Bureaus
NDI           Nacionalni demokratski institut                      National Democratic Institute
NF            Nacionalni fond                                      National Fund
NFQ           Nacionalni okvir kvalifikacija                       National Qualification Framework
NIPAC         Nacionalni IPA koordinator                           National IPA coordinator
NMI           Nacionalni metrološki institut                       National Metrology Institute
NOE           Neobuhvaćene ekonomske aktivnosti                    Non-observed Economy
NPT           Ugovor o neširenju nuklearnog oružja                 Nuclear Non-Proliferation Treaty
NSG           Grupa nuklearnih dobavljača                          Nuclear Suppliers Group
NTS           Nacionalna trening strategija                        National Training Strategy
NUTS          Nomenklatura teritorijalnih jedinica za statistiku   Nomenclature of Territorial Units for Statistics
              Organizacija za evropsku saradnju i                  Organisation for Security and Cooperation in
OEBS
              bezbjednost                                          Europe
                                                                   Organization for Economic Cooperation and
OECD          Organizacija za ekonomsku saradnju i razvoj
                                                                   Development
                                                                   Occupational Health and Safety Assessment
OHSAS         Serija procjena zdravlja i sigurnosti na radu
                                                                   Series
OIE           Svjetska organizacija za zdravlje životinja          World Organization for Animal Health
              Međunarodna organizacija za pravnu
OIML                                                               International Organization of Legal Metrology
              metrologiju
                                                                   Organization for the Prohibition of Chemical
OPCW          Organizacija za zabranu hemijskog oružja
                                                                   Weapons
              Organizacija za evropsku saradnju i                  Organisation for Security and Cooperation in
OSCE
              bezbjednost                                          Europe
OUN / UNO     Organizacija ujedinjenih nacija                      United Nation Organization
PARIM         Reforma javne uprave u Crnoj Gori                    Public Administration Reform in Montenegro
PARP          Proces planiranja i revizije                         Planning and Revision Process
PG / NG       Prirodni gas                                         Natural gas

                                                                                                               XV
                                       Government of Montenegro



PIC          Procedura prethodne saglasnosti                      Prior Informed Consent
             Strategija razvoja unutrašnje finansijske kontrole
PIFC                                                              Public Internal Financial Control
             u javnom sektoru
PIU          Jedinica za implementaciju projekta                  Project Implementation Unit
             Savjetodavni centar za ekonomska i pravna
PLAC                                                              Policy and Legal Advice Centre
             pitanja
POP          Dugotrajni organski zagađivači                       Persistent Organic Pollutants
             Perspektive inter-regionalnog transportnog           Perspectives on Inter-Regional Transport
PORTUS
             unitarnog sistema                                    Unitary System
PPP          Paritet kupovne moći                                 Purchase Power Parity
PRKK         Predregionalna konsultativna sjednica                Pre-Regional Consultative Meeting
PSI          inicijativa o bezbjednosti širenja naoružanja        Proliferation Security Initiative
PSJIE        Pakt stabilnosti jugoistočne Evrope                  Stability Pact for Southeast Europe
PTB          Physikalish Techniche Bundesantstalt                 Physikalish Techniche Bundesantstalt
RAE
             Romi, Aškalije i Egipćani                            Roma, Aschalie and Egyptians
populacija
RAI          Regionalna antikorupcijska inicijativa               Regional Anti-Corruption Initiative
             Brzi sistem javljanja za ne-prehrambene              Rapid Alert System for non-food consumer
RAPEX
             potrošačke proizvode                                 products
             Registracija, evaluacija, autorizacija i             Registration, Evaluation, Authorisation and
REACH
             ograničenje hemikalija                               Restriction of Chemicals
REBIS        Regionalna studija infrastrukture za Balkan          Regional Balcans Infrastructure Study
             Regionalni centar za životnu sredinu zemalja
REC                                                               Regional Environment Centre
             jugoistočne Evrope
             Regionalni centar za životnu sredinu zemalja         Regional Environmental Reconstruction
REREP
             jugoistočne Evrope                                   Programme for South East Europe
RESPA        Regionalna škola za državnu upravu                   Regional School for Public Administration
                                                                  Report on the Observance of Standards and
ROSC         Izvještaj o poštovanju standarda i propisa
                                                                  Codes
RSLO         kancelarija za vezu Regionalnog sekretarijata        Regional Secretariat Liaison Office
RTGS         Sistem poravnanja u realnom vremenu                  Real Time Gross Settlement
             Strateški pristup međunarodnom upravljanju           Strategic Approach to International Chemicals
SAICM
             hemikalijama                                         Management
             Strategija za kontrolu lakog i malokalibarskog
SALW                                                              Small Arms and Light Weapons (Strategy)
             naoružanja
SAP / BIO    Strateški akcioni plan za biološku raznovrsnost      Strategic Action Plans for Biological Diversity
SAPS         Šema plaćanja u jedinstvenom području                Single Area Payment Scheme
SCO / WCO    Svjetska carinska organizacija                       World Customs Organisation
SCS          Srpsko-crnogorski standard                           Serbia and Montenegro Standard
SDI / FDI    Strana direktna investicija                          Foreign Direct Investment
SE / CE      Savjet Evrope                                        Council of Europe
SECI         Sporazum o inicijativi za saradnju jugoistočne
                                                                  Southeast European Cooperative Initiative
sporazum     Evrope

XVI
                                   National Program for Integration



SEDM        Sastanak ministara odbrane jugoistočne Evrope       South-eastern Europe Defence Ministerial
SEE         Jugoistočna Evropa                                  Southeast Europe
SEECP       Proces saradnje u jugoistočnoj Evropi               South East Europe Cooperation Process
SEETO       Obzervatorija za saobraćaj Jugoistočne Evrope       South East Europe Transport Observatory
SEPA        Jedinistveno područje plačanja u eurima             Single Euro Payments Area
SFP         jedinstvena isplata za farmu                        Single Farm Payment
                                                                Swedish International Development
SIDA        Švedska agencija za razvoj i saradnju
                                                                (Cooperation) Agency
                                                                Support for Improvement in Governance and
            Podrška za unapređenje upravljanja i
SIGMA                                                           Management (for Central and Eastern Europe
            menadzmenta
                                                                Countries)
            Štokholmski insitut za istraživanje                 Stockholm International Peace Research
SIPRI
            međunarodnog mira                                   Institute
SKP         Sektor kriminalističke policije                     Criminology Police Department
SOFA        Sporazum o statusu snaga                            Status of Forces Agreement
SPA / RAC   Centar za specijalno zaštićena područja             Special Protection Area Regional Activity Centre
SPAI        Antikorupcijska inicijativa pakta stabilnosti       Stability Pact for Anti-Corruption Initiative
SPKN        Sporazum o podregionalnoj kontroli naoružanja       Sub-regional Control of Weapon Agreement
SSOP        Standardne operativne procedure u zdravstvu         Sanitation Standard Operating Procedures
SSP         Sporazum o stabilizaciji i pridruživanju            Stabilisation and Association Agreement
SSSR        Savez Sovjetskih Socijalističkih Republika          Union of Soviet Socialist Republics
            Strategija smanjenja siromaštva i socijalne         Strategy for Poverty Reduction and Social
SSSSI
            isključenosti                                       Inclusion
                                                                Standards of Training, Certification and Watch
STCW        Standardi obuke, certifikacije i praćenja
                                                                keeping
STO / WTO   Svjetska trgovinska organizacija                    World Trade Organisation
            Društvo svjetskih međubankarskih finansijskih       Society for Worldwide Interbank Financial
SWIFT
            telekomunikacija                                    Telecommunication
            Jedinica za tehničku podršku i razmjenu
TAIEX                                                           Technical Assistance Information Exchange Unit
            informacija
            Trans-evropski ekspresni sistem transfera za        Trans-European Automated Real-time Gross
TARGET
            automatska poravnanja u realnom vremenu             settlement Express Transfer System
TC-EM       Tehnički komitet - Elektricitet i magnetizam        Technical Committee-Electricity and Magnetism
TC-F        Tehnički komitet - protok                           Technical Committee-Flow
TC-IM       Tehnički komitet - interdisciplinarna metrologija   Technical Committee-Interdisciplinary Metrology
                                                                Technical Committee-Mass and related
TC-M        Tehnički komitet - težina i srodne količine
                                                                Quantities
TI          Tržišna inspekcija                                  Market Inspection
TIRS        Regionalna studija infrastrukture za Balkan         Transport Infrastructure Regional Study
TNG         Tečni naftni gas                                    Liquid oil gas
TRACES      Sistem kontrole trgovine i ekspertize               Trade Control and Expert System
TRIPS       Sporazum o trgovinskim aspektima prava              Agreement on Trade-Related Aspects of


                                                                                                            XVII
                                    Government of Montenegro



         intelektualne svojine                               Intellectual Property Rights
TSE      Prelazna encefalopatija                             Transmissible Spongiform Encephalopaties
UEZ      Ugovor o evropskoj zajednici                        European Unity Treaty
UHF      Ultra visoka frekvencija                            Ultra High Frequency
UIC      Međunarodna željeznička unija                       International Railway Union
         Sistem međunarodnog prikupljanja podataka o
UOE                                                          University Outreach and Engagement
         obrazovanju
UPOU     Konvencija o zaštiti novih biljnih sorti            Plant Variety Database
         Agencija Sjedinjenih Američkih država za            United States Agency for International
USAID
         međunarodni razvoj                                  Development
         Odjeljenje za poljoprivredu Sjedinjenih
USDA                                                         United States Department of Agriculture
         američkih država
VHF      Visoka frekvencija                                  Very High Frequency
VIES     Sistem razmjene informacija o PDV-u                 VAT Information Exchange System
WELMEC   Evropska saradnja u metrološkom pravu               European Cooperation in Legal Metrology
WIPO     Svjetska organizacija za intelektualno vlasništvo   World Intellectual Property Organization
WTO      Svjetska trgovinska organizacija                    World Trade Organization
         Zavod za međunarodnu, naučnu, kulturnu i            Office for International Science, Education,
ZAMTES
         tehničku saradnju                                   Cultural and Technical Cooperation
ŽCG      Željeznica Crne Gore                                Railway Company of Montenegro
ZZU      Zadnji zaštitni uređaj                              Last Protective Device




XVIII
                                      National Program for Integration



INTRODUCTION


Relationship between Montenegro and the European Union
Montenegro restored its statehood after the referendum held on 21 May 2006 on its state-legal status,
based on freely expressed will of its citizens, which was confirmed by adopting the Decision
Promulgating Independence of the Republic of Montenegro and by adopting the Declaration of
Independence in the Parliament of Montenegro on 3 June 2006. The international legal status of the
independent state of Montenegro was recognized immediately after that by its admission to
membership in the United Nations on 28 June 2006. Montenegro was, in the meantime, bilaterally
recognized as an independent state by a large number of countries. Diplomatic relations have already
been established with many of them.
It was only in the beginning of June 2007, forthwith after the recognition of the referendum outcome,
which the European Union and its member states decided to continue with furtherance of their
relations with Montenegro as an independent and sovereign state. This may be regarded a historical
decision made by the then 25 member states - the European Union has for the first time collectively
decided upon such an issue: collective recognition of independence of a state.
The strategic interest of Montenegro was, in the meantime, aimed at the continuance of negotiations
with the European Union on the Stabilization and Association Agreement. The European Commission
has prepared in a very short period of time a proposal on the negotiating directive to the Council which
in its session held on 24 July 2007 adopted in a summary procedure the proposed negotiating
directive according to which the European Union is empowered to continue negotiations on the
Stabilization and Association Agreement with Montenegro. This is an extremely important step forward
in the development of good relations of Montenegro with the European Union which, after several
rather comprehensive and constructive rounds of both political and technical negotiations, has
resulted in initialing the Agreement of Stabilization and Association of Montenegro to the European
Union on 15 March 2007 in Podgorica.
Based on the decision of the EU Ministerial Council of 15 September 2006, a political dialogue has
been established at the ministerial level between the Government of Montenegro and representatives
of the EU institutions. The first such dialogue commenced on 22 January 2007 and continued on 18
February 2008.
On 22 January 2007, the EU Council passed the Decision on the adoption of a new document on the
European Partnership with Montenegro1. All priorities set forth in the above document have been duly
incorporated into the Action Plan for Implementation of Recommendations from the European
Partnership. The Plan was adopted by the Government in May 2007. Reports on the level of fulfillment
of these recommendations are being submitted on regular basis. All crucial short-term priorities set
forth in this document have already been accomplished to a larger extent.
The act of signing by Montenegro of the Stabilization and Association Agreement on 15 October 2007
in Luxembourg, as well as of the Interim Agreement on Trade and Trade-Related Matters, means that
Montenegro has entered, not just formally but virtually, into the process of stabilization and accession
to the European Union, assuming in entirety all the responsibility for its own future in Europe.
The Agreement on Stabilization and Association has been unanimously supported by all parliamentary
parties and ratified in the Parliament of Montenegro on 13 November 2007. The consent to the
Agreement was given by the European Parliament on 13 December 2007. The implementation of the
Interim Agreement has successfully commenced since 1 January 2008. The Interim Committee has
been constituted in its first inaugural session held on 22 January 2008, when it has adopted its Rules
of Procedure as well as rules on the conduct of activities of sub-committees. It has been jointly
concluded that implementation of the Agreement is satisfactory and in compliance with the schedule
of projected activities. The successful implementation of the Agreement and willingness of
1
 Council Decision 2007/49/EC of 22 January 2007 on the principles, priorities and conditions contained in the European
Partnership with Montenegro (OJ L 20, 27.1.2007, p. 16)

                                                                                                                    1
                                     Government of Montenegro


Montenegro to implement and abide by all commitments set forth in the Interim Agreement, can also
be supported by the fact that bilateral negotiations with the EU have been finalized regarding the
accession of Montenegro to the WTO, as well as that Agreement on Montenegrin Concessions in the
Field of Commodities and Services with the EU was signed on 15 April 2008, in Brussels. The
accession of Montenegro to the WTO is planned to be finalized by the end of 2008.
The first sub-committee for internal market and competition has been constituted and its session held
on 10 March 2008; the second, for agriculture and fisheries, held on 16 April 2008 in Podgorica; the
third, for trade, taxes and customs duties, held on 26 May 2008 in Podgorica; and the fourth, for
transport on 5 June 2008 in Brussels. Finally, the fifth sub-committee’ meeting, for finances and
statistics, will be held at the beginning of October 2008 in Brussels.
Activities of the Montenegrin Government from the domain of European integration and fulfillment of
commitments relating to the process of stabilization and accession to the European Union are being
duly and timely presented to the Parliament of Montenegro. Since the adoption of the Declaration of
the Montenegrin Parliament regarding the European integration in June 2005 and until the end of
2007, the Montenegrin government has furnished ten comprehensive quarterly reports on its activities
realized in the European integration process.
The Parliament of Montenegro adopted on 27 December 2007 a new document – the Resolution on
the Fulfillment of Commitments of Montenegro Under the Stabilization and Association Agreement. It
is on the basis of this Resolution that the Government of Montenegro has ascertained a model of
monthly monitoring reports on the Agreement implementation which are to presented to the
Parliament on a regular basis. The reporting mechanism specified in such a manner represents also a
basis for further reporting to the Interim Committee and sub-committees as mixed bodies of
Montenegro and European communities in charge of monitoring the Agreement implementation.
Extremely dynamic deadlines (shortest ones in the region) set by the Agreement on Stabilization and
Association have been agreed upon:
    - a transitional period of 5 years as a maximum term set for the gradual opening of markets and
       establishment of a free trading zone between the European Union and Montenegro,
    - an implementation period of 5 years set for the full implementation of provisions of all articles
       of the Agreement, upon the complete ratification of the Stabilization and Association
       Agreement in all 27 parliaments of the EU member states.


Objectives of the National Program for Integration
By signing the Stabilization and Association Agreement, Montenegro has also assumed the obligation
to harmonize Montenegrin legislation with Acquis Communitaire, specifically and first of all the
obligation to implement successively and consistently the comparative legislation. Pursuant to Article
72 of the Stabilization and Association Agreement, the parties to the Agreement recognize all the
significance of harmonization of the existing Montenegrin legislation with the legislation of the
Community, as well as its efficient enforcement. Montenegro has dedicated itself to a gradual
harmonization of all its existing laws and future legislation with statutory regulations of the Community,
implying also adequate enforcement of the existing and future legislation.
As envisaged by the Agreement, harmonization commences as of the date of signing and
Montenegro, when agreed so with the European Union, should draw up a separate program for the
enforcement of the Stabilization and Association Agreement, pursuant to the provisions of Article 72.
Wishing to get Montenegro, particularly its state administration, prepared in due time for new
challenges, tasks and obligations, the Government of Montenegro has initiated varied activities in
order to draft the program much ahead of the signing of the Agreement. Namely, at its session held on
21 June 2007, the Government has decided to elaborate the National Program for Integration of
Montenegro into the EU (NPI) for the period of 2008-2012, based on the Information on the NPI
Activities. The structure of the document and schedule of activities to be undertaken in the procedure
of its elaboration represent an integral part of the Information.


2
                                  National Program for Integration


Apart from the fact that it is considered to be an implementation plan for the Stabilization and
Association Agreement, the National Program for Integration encompasses at the same time the
national plan for the adoption of the European law, i.e. Acquis Communautaire. Namely, each country
is obligated to prepare its own national plan for the Acquis adoption, the so-called NPAA. Taking into
consideration the fact that the process of harmonization of the national legislation with the entire body
of EU law has already been underway in Montenegro for several years, the Government of
Montenegro has opted for the solution of a single document which shall also embrace the Agreement
implementation plan, as well as the Acquis implementation plan.
It is after the successful commencement of implementation of the Interim Agreement and preparation
of the National Program for Integration that Montenegro has initiated an intensive communication on
the initiative for applying for the EU membership. Provided the European Commission replies to the
application with a positive opinion (Avis), Montenegro could be able to obtain the status of a candidate
country, and after the date is determined, it can commence with the process of negotiations.
The implementation of the Stabilization and Association Agreement and applying for the EU
membership are two separate processes based on different legal grounds set forth in the EU
Founding Treaty, however, they imply substantially the same efforts – harmonization of legislation and
implementation of the Acquis, as well as enhancement of overall administrative capacities of the state
leading to a next stage of the process of integration, i.e. accession to the EU.
The National Program for Integration represents thus a national plan for the adoption of the Acquis
and it shall formally become that after Montenegro obtains the status of a candidate for the EU
membership. The NPI encompasses, at the same time, many other documents duly drafted so far by
the Montenegrin administration, such as the Action Plan for Implementation of Recommendations from
the European Partnership and the Action Plan for Strengthening Administrative Capacities for
Implementation of the Agreement on Stabilization and Association. The NPI should also be regarded
as an association or integration strategy, similar to that prepared by some countries at a certain stage
of their road to the European Union. It is by encompassing all these documents within a single one
that the process of monitoring of all projected tasks and activities in all domains shall be rendered
much more easier and efficacious, and thus enable that reporting on accomplished results be
conducted in a high quality and timely manner.
Objectives of the National Program for Integration grounded on which is its elaboration are the
following:
     - defining of strategic development objectives, as well as relevant policies, reforms and
        measures requisite for the accomplishment of these objectives,
     - establishment of a detailed agenda of harmonization of legislation and institutional capacity
        building,
     - defining of human and budgetary resources, as well as provision of a foreign support
        indispensable for the fulfillment of projected tasks.
The NPI is regarded to be a detailed plan of activities necessary to enable Montenegro to become
ready to assume its commitments emanating from the EU membership by the end of 2012. The NPI is
therefore one of the crucial documents of the Government in the ensuing period. The National
Program shall not be used solely as a tool for coordination of reforms on the path to the EU and a
basis for drawing up annual Government work programs, but also as a transparent and
comprehensive information on projected reforms aimed to be furnished to the European Commission
and EU member states on one side, and to the Montenegrin society, on the other side. The National
program for Integration shall constitute a strategic framework of total democratic and economic
reforms of the country.
As a document which offers a precise and thorough overview of all reforms and activities envisaged
for realization in the ensuing five-year period, the NPI can also be used as a significant and reliable
information to all interested participants of the Montenegrin market, business entities and investors in
order to be able to plan their future activities. The general public in Montenegro shall, based on this
document, be able to obtain a better understanding of the process of the country’s gradual accession
to the European Union.

                                                                                                       3
                                     Government of Montenegro


The NPI shall ensure:

    -   a better overview of consistency of reforms,
    -   a better survey of all budgetary needs and resources and thus enable the Government to
        incorporate such needs in the budget during the coming years,
    -   a better survey of administrative and other capacities which are to be strengthened
        appropriately prior to the commencement of the process of negotiations,
    -   the basis for a good start on the process of negotiations, specifically for the definition of
        negotiating positions,
    -   last but not least - the NPI is meant to be a serious confirmation to the European Union of all
        the capabilities of Montenegro, as well as its genuine dedication to the process of integration.


Structure and methodology of preparation of the National Program for Integration
The National Program for Integration has been designed on the basis of the best practice of the
countries which has already completed successfully that stage of integration. The Program
encompasses the period between 1 January 2008 and 31 December 2012. All projected tasks in the
domain of harmonization with the EU legislation, as well as establishment and enhancement of the
institutional framework for the implementation of a harmonized national legislation in the ensuing five-
year period, have been divided into short-term priorities for the period by the end of 2009 and mid-
term priorities for the three-year period encompassing the years 2010, 2011 and 2012.
Although the National Program for Integration is envisaged for adoption in the second quarter of 2008,
the short-term priorities shall include the beginning of 2008 as well, when implementation of the
Interim Agreement on Trade and Trade-Related Matters has actually took place, facilitating thus that
implementation of both the Agreement and NPI be monitored concurrently and in a more efficient
manner.
Structure of the NPI
The NPI is composed of six basic textual wholes represented through the following chapters:
      1. Political criteria
      2. Economic criteria
      3. Capability of assuming obligations emanating from the EU membership
      4. Administrative and judiciary capacities for the Acquis implementation
      5. National Acquis version
      6. Financial appraisal of the NPI implementation.
Chapter 1 – Political Criteria – It is deemed to be a survey of abidance by political criteria from the
set of the so-called Copenhagen Criteria relating to the stability of institutions which are to guarantee
for democracy, rule of law, observance of human and minority rights. The structural framework of this
part is followed by a relevant chapter dealing with annual reports by the European Commission on the
progress made in this domain (EC Progress Reports).
Chapter 2 – Economic Criteria – This chapter is dedicated to the establishment and enhancement of
market economy, specifically ability of the Montenegrin economy to face the pressure of competition
as one existing in the EU. Short-term priorities are exhibited here, embracing the complete
transformation and restructuring of the Montenegrin economy into a functional market economy, while
mid-term priorities are targeted at facilitating the Montenegrin economy to be adequately positioned on
the unified European market.
Chapter 3 – Ability to Assume the Obligations of EU Membership - It represents actually the plan
of taking over the Acquis Communautarie, i.e. of transposing the European law into the national
legislation by the end of 2012. This is a largest chapter of the NPI consisting of 33 wholes which
correspond to the relevant negotiating chapters of the Acquis. Such a structure of Chapter 3 according
to which fulfillment of commitments is to be monitored in future negotiations of Montenegro on its


4
                                  National Program for Integration


accession to the EU, shall help the Montenegrin administration to be adequately prepared for the EU
Questionnaire.
Majority of these 33 sub-chapters within Chapter 3 of the NPI is further divided into several segments
depending on the type of a specific domain. The internal structure of almost all of these wholes is
identical and so easier to comprehend and obtain a clear picture of the current state and projected
tasks and terms set for each specific domain.
Each of these wholes aims to describe the following:
   1.     The state of the existing national regulatory framework for each specific domain, its
          compliance with the European legal order, as well as institutional framework for
          implementation.
   2.     Short-term priorities – statutory regulations planned for the period 2008-2009, the envisaged
          degree of harmonization with the Acquis, as well as administrative capacities for adoption
          and implementation of these regulations.
   3.     Mid-term priorities - statutory regulations planned for the period 2010-2012 which shall, by
          the end of that term, be completely harmonized with the Acquis, as well as administrative
          capacities for adoption and implementation of these regulations.
Each of these 33 negotiating chapters and mainly all of sub-chapters end with tables, i.e. schedules of
employment and Financial requirements presented by years for each of the involved institution, until
the end of 2012.
Chapter 4 – Administrative and Judiciary Capacities - This is a demonstration of administrative
capacities, i.e. of the capability of administration to implement the EU legal order in compliance with
standards and best practice the its member states. The chapter is composed of the following sub-
chapters:
    - An overview of state administration reforms (fundamental statutory regulations related to the
       state administration and characteristics of the existing administration, survey of all new legal
       acts, policies and strategies aimed at the enhancement of administrative capacities, training
       strategies and programs for betterment of knowledge about the new legal order, including an
       overview of the projected employment and establishment of new institutions – what is in fact a
       summary of facts contained in Chapter 3 – Capability of Assuming Obligations Emanating from
       the EU Membership).
    - An overview of judiciary reforms, training strategies and programs for the betterment of
       knowledge about the new legal order and Acquis within the judicial power.
Chapter 5 – the National Version of Acquis Communautarie - This chapter deals with a rather
voluminous and demanding task of translating the Acquis Communautarie from some of official EU
languages into Montenegrin language. The process of preparation of the national version
encompasses not only translation but also reviewing by legal experts, as well as proofreading.
Chapter 6 - Financial Assessment of the NPI Implementation – represents a brief survey of
financial requirements for the administrative budget (gross wages, preparation of regulations,
trainings, related material costs and a part of procurement of equipment) which are planned in the
previous chapters. Those funds will be supplemented by foreign support, primarily by the EU pre-
accession funds (IPA).
Methodology of the NPI Development
The compilation of the National Program for Integration has been based primarily on the Stabilization
and Association Agreement and Acquis Communautarie. Apart from that, priorities and commitments
specified by varied documents of relevance for European integrations, as well as by national
development documents have been incorporated. Consequently, the NPI embodies also the Action
Plan for Implementation of European Partnership Recommendations and Action Plan for
Strengthening Administrative Capacity, while the 2007 Annual Progress Report of the European
Commission for Montenegro has been taken as a valuable guide in defining priorities. The NPI is also
fully in compliance with the most important strategies and national development plans at the level of
both the state and specific sector policies. All tasks envisaged by the 2008 National Program for

                                                                                                     5
                                     Government of Montenegro


Integration in the domain of legislation and enhancement of administrative capacity have been
harmonized with the 2008 planning documents of Montenegro of the highest relevance – Economic
Policy, Budget and the Government Program.
A crucial role in the preparation of the NPI has been that of coordinating structures for European
integrations established in May 2007:

    -   Collegium for European Integrations – a political body chaired by the Prime Minister,
    -   Commission for European Integration – an expert body chaired by the Deputy Prime Minister
        for European Integration, and
    -   seven Groups for European Integration – primary operating and coordinating bodies chaired by
        deputy ministers.
The role of a coordinator of the overall process of planning, preparation and drawing up of the NPI, in
partnership with theses bodies and relevant EU groups in ministries, has been that of the Secretariat
of European Integrations. In the mid September 2007, the Secretariat organized seminars for the NPI
compilation, where all members of groups for EU integrations and officers of all ministries received
CDs with software programs and materials needed for the NPI preparation. Training was continued
during October, as well, and adapted to specific stages of the Program compilation. Some 400
employees from almost all state administration bodies have been involved and participated actively in
the process of preparation of the National Program of Integration, and thus another objective of this
all-inclusive document has been achieved – that of the improvement of coordination within the state
administration and efficient teamwork. Members of the Parliament included within the parliamentary
Committee for European Integration have been a partner to the Government for the issues related to
the political criteria.
In the first preliminary stage of the NPI compilation, the priority task of all groups for European
integration has been to define competencies for each of the Acquis regulations at the level of
ministries and appoint a person in charge, and after that to ascertain relevant Acquis regulations to be
harmonized with and to set corresponding time limits. It is in such a manner that a basis has been
created for the next two complementary and concurrent stages – writing of the textual part and
completion of forms for each existing and projected national regulation, encompassing also all parts of
the Acquis with which that regulation has already been complied or is to be harmonized with in the
period by 2012.
The database obtained on the basis of these forms shall constitute a preparatory basis for the
forthcoming answers to the European Commission Questionnaire and afterwards for negotiations on
accession to the EU. This database shall also be used as a valuable instrument for monitoring of
harmonization of the national legislation with that of Europe, and thus for monitoring of implementation
of the National Program for Integration.
Monitoring and Implementation of the National Program for Integration
As set forth in the Agreement on Stabilization and Association, Montenegro shall, together with the
Commission of the European Communities, define all requisite modalities for monitoring of the
process of harmonization of legislation and activities to be undertaken in respect to its implementation.
It is on the basis of the Interim Agreement the implementation of which has commenced since 1
January 2008, that the Interim Committee has been established as a first joint body of the EU and
Montenegro in charge of monitoring of implementation of the Agreement and thus of implementation of
the NPI. Five interim sub-committees have been constituted to be responsible for regular monitoring of
harmonization of the national legal system with the European legal system. After inception of
implementation of the Agreement on Stabilization and Association, seven joint sub-committees shall
be established in charge of monitoring of all 33 negotiating chapters which coincide with sub-chapters
within Chapter 3 of the NPI. The Montenegrin part of these sub-committees is constituted actually of
the existing groups for European integration which shall, with both political and expert support of the
Collegium and Commission for European Integrations and in coordination with the Secretariat for
European Integrations (SEI) and cooperation with the overall state administration, be given a central

6
                                   National Program for Integration


role in the process of implementation and monitoring of the NPI. In the next stage of integration
(accession), these seven groups shall further develop and turn into 33 negotiating groups.
Implementation of the NPI shall be also monitored by means of meetings of the Enhanced Permanent
Dialogue as a regular and established form of communications between the EU and Montenegro.
Missions of the EU representatives for varied issues shall also appraise and monitor the quality and
speed of harmonization of the legal order in compliance with the NPI schedules. One of the means of
monitoring of the NPI implementation shall also be annual Progress Reports of the European
Commission for Montenegro.
The Government of Montenegro shall be responsible to present quarterly reports to the Parliament of
Montenegro regarding the implementation of the NPI. An information system shall be developed within
the Secretariat for European Integrations which shall serve as a basis for the surveillance of
implementation and fulfillment of tasks projected by the National Program in view of time limits and
contents. The system shall be able to demonstrate at any time what is the stage the competent
authorities have arrived at and whether they fulfill projected tasks, and thus to enable the Government
to react whenever needed and ensure that the NPI is implemented in a timely and consistent manner.
Regardless of the fact that the NPI is a document prepared primarily by the Government, it shall be
necessary to have a support and participation of almost all segments of the society in its enforcement
and monitoring, first of all of the Parliament, experts and civil society . An expert and financial support
by the EU is also expected in that process.
Finally, what should also be emphasized is that the National Program for Integration is a living
document. It shall be subject to review each year, taking into consideration dynamics of the integration
process itself, as well as comments by the European Commission, constant upgrading of the Acquis
and particularly betterment of knowledge and raising awareness in Montenegro of the importance of
the European integration process.




                                                                                                         7
        Government of Montenegro




    1. POLITICAL CRITERIA




8
                                  National Program for Integration



1.1. DEMOCRACY AND RULE OF LAW


According to the Constitution of Montenegro (Off. Gazette of MNE, No. 01/07), Montenegro is a civic
state of the republican form of government, a social and ecological state with the full respect for
human rights and freedoms and special guarantees of right and freedoms to the members of minority
communities in compliance with international standards and recommendations. Montenegro is a
country of parliamentary democracy, a state of balanced parliamentarism and the division of power
into the legislative, executive and judicial. These powers, i.e. institutions they are vested in are
independent in the performance of their constitutional and statutory competencies, but are obligated to
cooperate with each other.
The full civil and democratic supervision is established in Montenegro of all security structures and
army. A high level of independence of judicial power has been provided as a prerequisite for timely
and successful resolution of problems existing in this domain. The Constitution of Montenegro
contains the democratic standard of supremacy of international law over the national law. There is
also an integrative clause (Article 15) which sets forth the manner of accession of Montenegro to the
European Union. Thus, no changes and amendments to the Constitution shall be needed for the entry
of Montenegro into the European Union, it is to be decided by the Parliament of Montenegro.

1.1.1. CONSTITUTION AND THE CONSTITUTIONAL LAW
Following the successfully conducted referendum on 21 May 2006 and proclamation of the
independent and sovereign state of Montenegro on 3 June 2006, Montenegro has adopted the first
Constitution of the independent state of Montenegro after a thorough and serious process of
harmonization embraced by which were all structures of both the civil and political segments of the
Montenegrin society.
The Constitution (Official Gazette of Montenegro, No. 01/07 and 09/08) has been adopted on 19
October 2007 with a high degree of conformance, supported by 2/3 of members of the Parliament, and
promulgated by a Decision of the Constituent Assembly on 22 October 2007. Such a fact, beyond any
doubt, is testimony to the growing maturity of the Montenegrin Parliament and therefore it has
received a deserved recognition by the international community. The Constitution has been drawn up
in full coordination with relevant international institutions, such as the Council of Europe, OSCE and
particularly the Venetian Commission as a body of the European Commission for Democracy through
Law. The Constitution has been compiled fully in compliance with the European standards.
The Constitutional Law for the enforcement of the Constitution of Montenegro (Official Gazette of
Montenegro, No. 01/07) has set forth the obligations of the Parliament relating to the legislative
activities in the ensuing period. The Parliament is obligated to pass new laws within the set time limits
for the constitution of new institutions and definition of their competencies laid down by the
Constitution, as well as to adapt some of the existing laws to the newly created social reality and to
draft new laws which do not exist in the legal system of Montenegro but are an indispensable
prerequisite for its further democratic development.

1.1.2. PARLIAMENT
Soon after completion of parliamentary elections of 10 September 2006, the Parliament of the present
convocation has been constituted on 2 October 2006, composed of 81 deputies, i.e. members of the
Parliament from 16 political parties. Eight MP clubs have been constituted and 11 permanent working
bodies established.
New parliamentary elections are envisaged to be held at latest by the end of 2009 as prescribed by
Article 14 of the Constitutional Law for the enforcement of the Constitution of Montenegro.
On 27 December 2007, the Parliament adopted the Resolution on Fulfillment of Obligations of
Montenegro under the Stabilization and Association Agreement (Official Gazette of the Republic of
Montenegro, No. 02/08), confirming in entirety its commitments set out in the Declaration on

                                                                                                       9
                                      Government of Montenegro


Association with the European Union endorsed by the Parliament on 8 June 2005, pursuant to which
the Government shall be obligated to present monthly reports to the Committee for International
Cooperation and European Integration on the fulfillment of obligations under the Agreement on
Stabilization and Association (Interim Agreement) and three-month reports on the total activities
undertaken within the Stabilization and Association Process.
The Rules of Procedure of the Parliament of Montenegro (Official Gazette of the Republic of
Montenegro, No. 51/06 and 66/06) have been applied since the constitution of the new parliamentary
convocation. A new parliamentary position has been introduced – that of the Vice-President of the
Parliament for parliamentary opposition representatives, as well as a regular Prime Minister’s
Question Hour – two-monthly reporting of the Prime Minister and members of the Government before
the Parliament.
Governed by the Rules of Procedure are the issues related to the constitution, organization and the
manner of proceeding by the Parliament; rights and obligations of MPs; parliamentary procedures;
relationship between the Parliament and other state bodies; cooperation of the Parliament with
parliaments of other states; principles of organization of the Administrative Service of the Parliament
and other issues of relevance for the work and exercise of parliamentary functions; procedures of
consideration and adoption of laws and other enactments. The Rules of Procedure of the Parliament
prescribe also instruments and procedures for the conduct of political control and supervision by the
Parliament over the bodies of executive power and their work, as well as other issues emanating from
the constitutional competencies of the Parliament.
The work of the Parliament is organized through parliamentary boards and then in a plenary session.
Parliamentary boards are:
   - Board for Constitutional Affairs and Legislation,
   - Board for Political System, Judiciary and Administration,
   - Board for Security and Defense,
   - Board for International Relations and European Integrations,
   - Board for Economy, Finance and Budget,
   - Board for Human Rights and Freedoms,
   - Board for Gender Equality,
   - Board for Tourism, Agriculture, Ecology and Physical Planning,
   - Board for Education, Science, Culture and Sport,
   - Board for Health, Labor and Social Welfare, and
   - Administrative Board.
The Parliament decides on the establishment of permanent boards and determines the scope of their
activities and number of their members. Tasks and duties of parliamentary boards are mainly in the
function of plenary sessions. The composition of boards, including the chairman and his deputy, is in
proportion to representation of political parties, i.e. number of seats they hold in the Parliament. As
regards the chairman and deputy chairmen – one of them must be elected from among the ruling and
the other from among parliamentary opposition parties. Presently, out of the total of 11 boards, two
parliamentary boards are chaired by opposition MPs, and in other nine boards opposition MPs occupy
the position of deputy chairmen. It is in such a manner that opposition MPs are given the opportunity
to participate actively and constructively in the work of the Parliament. The scope of work of each of
the boards is specifically defined by the Rules of Procedure and Decision of the Parliament on the
establishment of boards.
Permanent boards discuss drafts and proposals of laws, declarations, resolutions and other
documents and enactments to be adopted by the Parliament, as well as other issues within the
competence of the Parliament. Sessions of boards are open for public. Scientific and expert advisers,
representatives of local self-governments, trade union organizations, non-governmental organizations,
institutions of civic society may be invited to attend the sessions in order to render their opinions about
topics under discussion.
Interim boards are established to deal with special tasks, as well as boards in charge of investigation
in each of varied fields and on each issue of public interest.

10
                                  National Program for Integration


The Board for International Relations and European Integrations has a very specific and important role
from the aspect of association with the European Union. Its competencies are to:

   -   monitor the performance of rights and obligations of Montenegro emanating from international
       treaties and documents of the Council of Europe,
   -   monitor the compliance of laws proposed for adoption, i.e. draft laws with the EU laws,
   -   perform monitoring of the process of harmonization of Montenegrin legislation with the EU
       legislation and propose measures for the furtherance of harmonization procedures,
   -   monitor fulfillment of obligations which, based on the Montenegrin Government Work Plan,
       emanate from agreements between Montenegro and the European Union,
   -   perform monitoring of activities of the Government and institutions of the state administration
       the objective of which is to join the membership of the EU, including also opinions and
       recommendations in that respect,
   -   inform the Parliament in due and timely manner on all issues of relevance for the European
       integration,
   -   cooperate with parliamentary boards of other countries,
   -   consider international treaties which are to be ratified by the Parliament or the ratification of
       which is to be consented to by the Parliament.
The Board for International Relations and European Integrations will prepare of a plan of activities
stemming from the Stabilization and Association Agreement between European Communities and
Montenegro, ratified by the Parliament on 13 November 2007.
Activities on changes and amendments to the Rules of Procedure of the Parliament are underway.
The aim is to define more precisely all relevant procedures, to improve solutions regarding the position
of boards as parliamentary working bodies, to ascertain a special procedure to be applied to the laws
by which the legal system of Montenegro shall be adapted to the European standards. The Parliament
should raise the level of its own accountability and thus the accountability of all its working bodies,
specifically that of the Board for International Relations and European Integrations, in order to be able
to meet all of its obligations.
Accordingly, there are some parliamentary enactments which shall precisely define the role of the
Parliament in the process of implementation of the Stabilization and Association Agreement, the
drawing up of which is envisaged for the first half of 2008.
During 2007 and in first quarter of 2008, the Board organized several seminars aimed at professional
training of MPs and state administration officers. In cooperation with the European Parliament (COX
Program), a seminar dedicated to the acquisition of new knowledge from the domain of European
integration was held for MPs and the administrative service of the Parliament.
A Decision on the Establishement of the National Council for European Integrations was rendered
(Off. Gazette of MNE, No. 22/08). The National Council for European Integrations is envisaged as a
strategic advisory body with high participation level of the representatives of Montenegrin society,
which will contribute to a better coordination and supervision of the Stabilization and Association
Agreement’ implementation and monitoring future negotiations on Montenegro’ accession to the EU.
In line with Art. 3 of the said Decision, the President of the National Council is selected among MPs of
opposition political parties, and the Vice-President of the National Council is selected among the
parliamentary majority’s MPs.
Within the new competencies of the Parliament laid down by the Rules of Procedure, the supervisory
function of the Parliament embodies three procedures of control: consultation hearing, control hearing
and parliamentary investigation, the procedure of which was laid down by the Rules of Procedure.
The Supreme State Prosecutor and Ombudsman (commissioner for the protection of human rights
and freedoms), Central Bank of Montenegro, Ministry of Defense, Police Administration, National
Security Agency, Public Auditing Institution, Power Management Regulatory Agency and Money
Laundering and Terrorism Funding Prevention Authority are obligated to present their annual reports
to the Parliament, which are then discussed in plenary sessions.

                                                                                                      11
                                     Government of Montenegro


Following its admission to international organizations, Montenegro has established its permanent
missions which participate actively in varied international parliamentary structures, Council of Europe,
OSCE, NATO, IPU etc., and cooperate with parliaments of other countries.

1.1.2.1. Electoral Process
Regulatory framework
Voting right is one of the fundamental rights within the corpus of political rights and freedoms in
Montenegro. The Constitution prescribes that every citizen of Montenegro who has reached the age of
18 and has at least two years of permanent residence in Montenegro shall be entitled to vote and be
elected. The voting right is general and equal. Elections are free and direct and voting is conducted by
secret ballot.
The existing regulatory framework for the conduct of elections at all levels is composed of the Law on
Election of Councilors and Deputies, Law on Electoral Lists, Law on Election of the President of
Montenegro, Law on Election of Mayors (Presidents of Municipalities) and the Political Parties
Financing Law.
Electoral legislation is grounded upon the fundamental principles of the European electoral legislation,
such as: general, equal, secret and direct voting right, as well as upon the principle of holding
elections on a regular basis.
According to the practice applicable in Montenegro so far, proposals of laws from the domain of
electoral legislation have been prepared by working groups established by the Parliament from among
the representatives of all MP clubs, meaning that the positive legislation in this domain appears as a
result of consensus of all parliamentary parties. The reason for the establishment of such a practice in
the creation of electoral legislation has been to obtain a largest possible degree of confidence of all
participants of the electoral process in its fairness.
The Law on Election of Councilors and Deputies (Official Gazette of the Republic of Montenegro, Nos.
4/98, 5/98, 17/98, 14/00, 18/00, 9/01, 41/02, 46/02, 45/04, 48/06, 56/06) governs the issues of the
election and cessation of term of office of councilors in the municipal assemblies of the Capital City
and Administrative Center of Montenegro, as well as deputies (MPs) in the Parliament of Montenegro,
including also the protection of the voting right.
The Parliament of Montenegro and municipal assemblies consist of deputies (MPs), i.e. councilors
elected by citizens in direct and secret ballot, on the basis of a general and equitable voting right.
The Parliament of Montenegro has 81 MPs. The term of office of councilors, i.e. MPs is four years.
Pursuant to the Law, the election of councilors is conducted in a municipality as a single electoral
constituency, and the election of deputies (MPs) in the Republic as a single electoral constituency. In
the Republic, as a single electoral constituency, five MPs out of the total number of MPs are elected in
the polling stations (in which Albanians make majority) which are determined by a special decision of
the Parliament of Montenegro.
The President of Montenegro calls elections for deputies, whereas mayors call elections for
councilors.
Elections are administered by election administration bodies: polling boards, municipal election
commissions and the National (State) Election Commission.
The Law on Electoral Lists (Official Gazette of the Republic of Montenegro, Nos. 14/00, 18/00)
prescribes the manner of keeping records of citizens with the voting right. Electoral lists, as public
documents, shall be used solely for the purpose of elections. The electoral list is kept ex officio, it is
uniform, permanent and regularly updated, particularly after calling for elections. It is kept for the
territory of a local self-government unit.
According to the Law on Election of the President of Montenegro (Official Gazette of the Republic of
Montenegro, No. 17/07), the procedure of election of the president of Montenegro shall be conducted


12
                                        National Program for Integration


by the National Election Commission, municipal election commissions and polling boards, in charge of
the election of councilors and MPs.
It is prescribed by the Law that the president of Montenegro shall be elected in general and direct
elections by secret ballot, for a term of office of five years. Every citizen of Montenegro who has
reached the age of 18 and has his permanent place of residence in Montenegro for at least 10 years
during the last 15-year period before holding elections, shall be entitled to be elected to the office of
the president of Montenegro.
Elections for the president of Montenegro shall be called for by the president of the Parliament, at
latest 120 days prior to the expiry of the term of office of the president of Montenegro. The Parliament
has passed the Decision on Appointment of the President, Secretary and Members of the National
Election Commission (Official Gazette of the Republic of Montenegro, No. 02/08).
Pursuant to the Law on Election of Mayors (presidents of municipalities) (Official Gazette of the
Republic of Montenegro, No. 42/03), mayors (presidents of municipalities) shall be elected by citizens
in general elections by direct and secret ballot, and for a term of office of five years.
Every citizen of Montenegro shall be entitled to vote and be elected the mayor (president of a
municipality) who, in compliance with the Law, is entitled to vote and be elected a councilor of the
municipal assembly in which he stands as a candidate for the mayor’s office.
The Political Parties Financing Law (Official Gazette of the Republic of Montenegro, No. 21/04, 33/05,
47/06) governs the manner of fund acquisition and raising by political parties, as well as the manner of
supervision of financing and financial operations of political parties for the purpose of achieving their
legitimacy and publicity.
The Government has drawn up a Proposal of the Law on Financing the Campaign for Election of the
President of Montenegro, Mayors (Presidents of Municipalities), as well as a Proposal of the Political
Parties Financing Law and submitted them to the Parliament for adoption (11 December 2007).
In line with the Constitutional Law for Implementation of the Constitution of Montenegro, the Law on
the Election of Councilors and Members of Parliament and the Law on Electoral Lists will be
harmonized with the Constitution of Montenegro.
Further activities shall be continued in order to reach highest standards in the organization of elections
and implementation of a transparent frame for electoral campaign financing.

1.1.2.2. State Institutions Employment Requirements (Budget Beneficiaries)
                         Existing -                               Projected number of state empoloyees
Title of Institution                                   2007
                         Projected                                2008      2009        2010     2011      2012
    Parliament of
                          Existing Institution         76             114     130          130    180           200
    Montenegro


                       2008                2009                  2010               2011                 2012
Budgetary
                   €5,170,86117       €11,673,033,96        No Data          No Data             No Data
funds




                                                                                                                  13
                                     Government of Montenegro


               - OSCE
               Parliamentary
               Support
               Program
               (€ 150.000)
                                                        OSCE
               - UNDP and            OSCE                                OSCE
Support by                                          Parliamentary
               CDP               Parliamentary                        Parliamentary
foreign                                                Support
               (€ 100.000)      Support Program                      Support Program
institutions                                          Prrogram
               -Legislative       (€ 150.000)                          (€150.000)
                                                     (€150.000)
               Institution
               Strengthening
               Program NDI/
               USAID
               (€ 508.000 )

1.1.3. THE GOVERNMENT
Legislative framework
Legislative framework for the functioning of the Government of Montenegro consists of the following:
Constitution of Montenegro, Law on Public Administration, Decree on Government, Rule of Procedure
of the Government, Decree on the General Secretariat of the Government of Montenegro.
The Government, which was elected on 29 February 2008, consists of the President, two Vice-
presidents (for European Integrations and Economic Development), 13 ministers on the head of the
ministries and one minister without portfolio.
The Government is enacting a work program for the period of one year, whose basis are included in
the Mandatory’s Program for the Composition of the Government, which is adopted by the Parliament
of Montenegro, and relates to a four-year mandate period and economic policies measures for the
current year.
Government’s Work Program for 2008 gives priority to the further development of the European
Integrations process; dynamic and sustainable economic development with the objective of providing
higher living standard for each citizen; creation of system conditions for a balanced regional
development of Montenegro; further administrative and judicial reforms, with particular emphasis on
the rule of law and institutional strengthening; fight against corruption and organized crime; protection
of human rights and freedoms and minority rights; protection and promotion of cultural heritage;
consistent implementation of established foreign policy priorities and in that regard, strengthening of
regional cooperation and good relations with the neighboring countries.
The Program is specifying tasks for 2008 that are based on established Government’s priorities and
Agreement on Stabilization and Association. Additionally, activities have been defined for further
implementation of the Action Plan for the Implementation of Recommendations from the European
Partnership, as well as the Action Plan for Administrative Capacity Building for the Implementation of
the Agreement on Stabilization and Association. Program includes obligations based on the
Constitutional Law for Implementation of the Constitution of Montenegro, Montenegro Progress Report
of the European Commission for 2007, strategic documents and enacted laws, membership in the
international organizations and ratified conventions and the Action Plan for the Fight against
Corruption and Crime.
This Program is envisaging 353 obligations, namely: in the thematic section 174, normative - 179,
whereof 141 laws and 38 decrees. Planned obligations have been systematized according to the
following areas: 1) Monitoring of the European Integrations Process; 2) Political System, Domestic and
Foreign Policy; 3) Economic Policy; 4) Financial System and Public Expenditures, including brief
contents, developers, preparation deadlines and the authorized Government’s working bodies for
discussion.
General Secretariat of the Government is supervising the implementation of the obligations
established by the Work Program and submits quarterly reports to the Government.

14
                                   National Program for Integration


Law on Public Administration (Official Gazette of RoM No. 38/03 and 22/08) stipulates that the
Government shall establish public administration bodies. Supervision of the legality of the work of
public administration bodies is done by the ministries.
Decree on the Government of the Republic of Montenegro (Official Gazette of RoM No. 15/94 and
4/97) regulates basic issues related to organization, manner of work and decision making of the
Government. The Decree is establishing rights and obligations of the President and members of the
Government, establishment of permanent commissions of the Government, scheduling of the
Government’s sessions, decision making, acts enacted by the Government, Parliament of
Montenegro, transparency of the Government’s work, manner of performing supervision of the work of
ministries and other administrative bodies.
Rule of Procedures of the Government of Montenegro (Official Gazette of RoM No. 45/01, 09/03,
71/04, 71/06 and 18/08), is closely regulating organization, manner of work and decision making of the
Government, work of its commissions and other issues relevant for the work of the Government. Rule
of Procedures defines procedures for the preparation of material, deadlines for submission of the
material, obligation to obtain relevant opinions from the ministries or obligation to be in compliance
with the legislative Secretariat, examination by the relevant Government’s commissions, and
enactment of Government’s decisions.
Rule of Procedures defines that the Government shall establish commissions or other working bodies
in order to improve work efficiency.
With the Decree on General Secretariat (Official Gazette of RoM No. 12/92, 09/03, 36/03, 24/04,
55/05), the Government has established a General Secretariat, as a separate service, which performs
activities related to analyzing and professional elaboration of acts and materials from the aspect of
their compliance with established policy in a specific area, and their formal compliance with the Rule of
Procedures, and provides administrative support for the scheduling of Government sessions and
submission of material, drafting of reports, conclusions, minutes and monitoring implementation of
Government’s conclusions, preparation of the Government’s work program, and performs activities
related to informing the public of the work of the Government and other activities within its jurisdiction.
Within the General Secretariat of the Government, in addition to the cabinet of the President of the
Government and cabinets of the two vice-presidents (for European integrations and for economic
policy and finance), separate internal organizational units have been established: Department for the
Work of the Government and Department for Planning, Coordination and Monitoring of Implementation
of the Government’s Work, Agency for Public Relations, Office for Gender Equality, Office for the Fight
Against Human Trafficking, Office for Sustainable Development, Office for Representation of
Montenegro before the European Court of Human Rights and the Office for Cooperation with Non-
governmental organizations and Department for General Affairs and Finance.
General Secretariat is managed by the Secretary General of the Government who is taking care of
preparation of the Government’s sessions, assists to the President of the Government in organization
and preparation of the sessions, preparation, enactment and implementation of the Work Program of
the Government, implementation of Government’s conclusions and preparation of material required for
the Government’s work.
Rulebook on Internal Organization and Systematization of the General Secretariat of the Government
envisages 88 posts with 121 executors.

1.1.3.1. Public Administration
Strategy of Administrative Reforms of Montenegro 2002-2009 has established policies, main
objectives and measures of the reform process of the entire public administration and therefore state
administration. Key objectives of the administrative reforms in Montenegro are: significant delegation
of authorities to the lower system levels, which enables higher degree of flexibility of the entire
administrative system; ensuring better quality in performing tasks and introducing specific control
mechanisms and encouraging efficient establishing of responsibilities on all levels; competition and
possibilities of choosing administrative services; development of public services and services for the

                                                                                                        15
                                     Government of Montenegro


end users – citizens and companies; ensuring better management of human potential in the
administration and improving position of key government employees; optimal utilization of modern
information technology; raising the level of quality of legal regulations and conducting deregulation in
specific over-regulated areas and strengthening monitoring function of the administrative system.
During the previous activities related to public administration reforms, in accordance with obligations
and deadlines established by the Strategy of Administrative Reforms of Montenegro 2002-2009, new
normative-legislative framework has been created for changes in the work and functioning of the
public administration bodies.
Legislative framework
The Law on Public Administration (Official Gazette of RoM No. 38/03 and 22/08) is establishing the
concept of modern, professional, efficient and effective public administration in Montenegro, with the
changed role of the ministries and other administrative bodies with quality, new obligations related to
relations with citizens.
For the implementation of this Law, the following bylaws have been enacted:
- Decree on Organization and Manner of Work of the Public Administration (Official Gazette of RoM
   No. 54/04, 78/04, 6/05, 61/05, 6/06, 32/06, 42/06, 56/06, 60/06, 72/06, 6/07, 25/07, 32/07 and
   Official Gazette of RoM No. 6/07), and
- Decree on Job Groups, Criteria for Internal Organization and Systematization, Job Nomenclature
   and Draft Number of Executors in the Public Administration Bodies (Official Gazette of RoM No.
   54/04).
The Law on Inspection Control (Official Gazette of RoM No. 39/03) regulates all relevant elements of
inspection control, which provides an insight in the work and proceedings of institutions, legal entities,
government and municipalities’ bodies, administrative capita, capital city and the Republic, individuals
and other entities in respect of compliance with regulations and undertaking of adequate measures. It
covers general issues related to performance of inspection control, principles of inspection control,
obligations and authorizations of the inspector, rights and obligations of the inspected entity and other
persons, inspection control procedure, special activities of the inspection procedure, relations between
inspection and other bodies, costs of the inspection procedure, joint performing of inspection control,
status issues and inspectors’ responsibilities.
For the implementation of this Law, the following bylaws have been enacted: Decree on Joint
Inspection Control (Official Gazette of RoM No. 48/03) and Rulebook on Inspection Identity Card
(Official Gazette of RoM No. 48/03).
The Law on Ombudsman (Official Gazette of RoM No. 41/03) regulates the basic mission of this new
democratic institution and represents the institutional form of concern and care of protection and
development of human rights and freedoms, guaranteed by the Constitution, laws, ratified international
agreements and generally accepted rules of the international law. For the implementation of this Law,
Rules on the Work of Ombudsman have been enacted (Official Gazette of RoM No. 6/04)
The Law on General Administrative Procedure (Official Gazette of RoM No. 60/03) has established a
procedure for government bodies and local self-government bodies related to the direct
implementation of regulations for administrative matters when deciding on rights, obligations or legal
interests of individuals, legal entities or other parties, as well as for performing other operations
established by this Law. It includes basic principles, real and local responsibilities, definition of the
party and its representation, communication of bodies and parties, submitting, in writing, deadlines in
the administrative procedure, return to the previous condition, maintaining order, costs of procedure,
course of procedure and enacting decisions, appeal procedure, special cases of annulment,
abolishing and changing of the decision, execution of the decision, implementation of the law and
inspection control. Decree on Compensation of Costs in the Administrative Procedure (Official Gazette
of RoM No. 6/04) has been enacted for the implementation of this Law.
Law on Civil Servants and Government Employees (Official Gazette of RoM No. 27/04 and 31/05)
regulates issues related to the status, that is, position of civil servants and government employees,
employment, jobs, rights and obligations, responsibilities, assignment, evaluation, advancement and
16
                                   National Program for Integration


establishing competencies, professional training, termination of employment, protection of government
employees and civil servants’ rights, human resource management and supervision.
For the implementation of this Law, the following bylaws have been enacted:
- Decree on the Manner and Procedure of Implementation of Internal Job Announcement in the
   Government Bodies (Official Gazette of RoM No. 73/04),
- Decision on Establishment and Composition of the Complaints Commission (Official Gazette of
   RoM No. 69/04, 5/05, 20/05 and 59/05,53/07),
- Decree on the Type of Recognition and Awarding Procedure for Government Employees and Civil
   Servants (Official Gazette of RoM No. 20/05),
- Decree on the Manner and Procedure of Evaluation Trial Work in the Government Bodies (Official
   Gazette of RoM No. 17/05),
- Decree on the Criteria for Evaluating Work of Managers in the Government Body (Official Gazette
   of RoM No. 27/05),
- Decree on the Program and Manner of taking Professional Exam for the Work in the Government
   Bodies (Official Gazette of RoM No. 29/05 and 6/07)
- Decree on the Procedure for Testing Competencies for Performing Work of Government
   Employees (Official Gazette of RoM No. 33/05)
- Code of Ethics for Government Employees and Civil Servants (Official Gazette of RoM No. 81/05).
Law on Salaries of Government Employees and Civil Servants (Official Gazette of RoM No. 27/04 i
17/07) includes legislative solutions related to realization of the right on salaries, compensations and
other income of government employees and civil servants, and issues related to salaries’ structure,
classification in salaries ranks, compensations and other income, maintaining central and other
records, etc.
For the implementation of this Law, the following bylaws have been enacted: Decree on
Compensations and other Income of Government Employees and Civil Servants (Official Gazette of
RoM No. 24/05, 42/05 and 70/06 and Decree on Additions to the Salaries of Government Employees
and Civil Servants (Official Gazette of RoM No. 24/05).

1.1.3.2. Organization of Public Administration
Organization of public administration has been established by the Decree on Organization and
Manner of Work of the Public Administration (Official Gazette of RoM No. 16/07) within 13 ministries,
15 administrations, 3 secretariats, 9 bureaus, 5 directorates and one agency.
Public administration activities are performed by the ministries and other administrative bodies.
Specific public administration’s activities are performed by the local self-government bodies,
institutions and legal entities, as public authorizations, when these activities have been delegated, i.e.
assigned to them.
Work of the public administration bodies is public. Data, documents, reports and information of the
public administration bodies are available to the citizens, except in cases defined by the law. The work
of administrative bodies is subject to control.
Ministries are established for one or more related administrative areas, depending on the nature,
importance and scope of activities and a need to provide the development strategy. Ministries are
performing activities related to proposals of domestic and foreign policy, implementation of
development policy, legislative activities and administrative supervision in compliance with the law.
The ministries are:
               1. Ministry of Justice,
               2. Ministry of Internal Affairs and Public Administration,
               3. Ministry of Defense,
               4. Ministry of Finance,
               5. Ministry of Foreign Affairs,
               6. Ministry of Education and Science,
               7. Ministry of Culture, Sports and Media,

                                                                                                       17
                                       Government of Montenegro


               8. Ministry of Economic Development,
               9. Ministry of Transportation, Maritime Affairs and Telecommunications,
               10. Ministry of agriculture, Forestry and Water Management,
               11. Ministry of Tourism and Environmental Protection,
               12. Ministry of Health, Labor and Social Welfare and
               13. Ministry for Protection of Human and Minority Rights.
Administrative bodies are established for performing activities related to implementation of the laws
and other regulations, administrative and professional operations in the administrative areas for which
the ministries have been established and in other areas, when the volume and nature of activities
require working independence. Administrative bodies, as bodies that perform mainly administrative
and related professional activities are secretariats, bureaus, directorates and agencies, as bodies that
perform mainly professional activities.
Administrations are bodies that are directly implementing laws and other regulations and decide on the
rights and obligations of individuals and legal entities and other subjects.
Administrations are:
                1. Tax Administration,
                2. Real Estate Administration,
                3. Customs Administration,
                4. Administration for Maritime Security,
                5. Veterinary Administration,
                6. Administration for Anti-Corruptive Initiative,
                7. Administration for the Prevention of Money-Laundering and Financing Terrorism,
                8. Forest Administration,
                9. Water Administration,
              10. Human Resources Administration,
              11. Police Administration,
              12. Medications and Medical Instruments Administration,
              13. Civil Aviation Administration
              14. Administration for the Protection of Competition and
              15. Administration for Chance Games.


Secretariats are administrative bodies that perform mainly professional activities, with the possibility of
performing specific administrative and other activities.
Secretariats are:
                1. Secretariat for Legislation,
                2. Secretariat for Development,
                3. Secretariat for European Integrations.
Bureaus are administrative bodies that perform professional and related administrative activities by
applying scientific methods and knowledge.
Bureaus are:
                1.   Bureau of Statistics,
                2.   Hydro-metrological Bureau,
                3.   Seismological Bureau,
                4.   Bureau for International Scientific, Educational – Cultural and Technical
                     Cooperation,
                5.   Bureau of Education,
                6.   Bureau for Execution of Criminal Sanctions,
                7.   State Archives,
                8.   Bureau for Metrology,
                9.   Bureau for Refugees,
               10.   Bureau for Intellectual Property.

18
                                   National Program for Integration


Directorates are administrative bodies that perform mainly professional and related administrative
activities related to the economic area. Directorates are:
                1.   Directorate for Public Works,
                2.   Directorate for Transportation,
                3.   Directorate for Public Procurements,
                4.   Directorate for Development of Small and Medium Sized Enterprises,
                5.   Directorate for the Protection of Data.
Agencies are administrative bodies that perform professional and related administrative activities by
applying market principles, that is, providing services and ensuring growth and development.
Agency for Promotion of Foreign Investments and Agency for Economic Restructuring and Foreign
Investments are not administration bodies; they are bodies sui generis – established by the separate
Government’s decision, i.e. established by the law.
Strategic principles for professional, efficient, responsible, economically and politically neutral and
service-oriented public administration are included in the Law on Civil Servants and Government
Employees, which, together with the Law on Salaries of Civil Servants and Government Employees
and other regulations represent a basic requirement for the public administration reform in
Montenegro.
The division has been made of the employees in public administration to government employees and
civil servants. Government employee is a person that performs mainly administrative and related
professional activities for the government body, while the civil servant is a person that performs
administrative-technical and supporting activities.
Innovations in the system and procedures for employment of government employees and civil
servants, ensure, among other things, professionalism of the administrative system, flexibility and
mobility of human resources, monitoring and records on the internal labor market, work legitimacy and
responsibility, appropriate forms, basis and procedures for protection of government employees and
civil servants, adequate participation of the trade union has been ensured, in accordance with its role
in protecting rights of the employees that are related to work and are work-based.
Government employees and civil servants are employed exclusively through the public job
advertisement, while the management personnel are employed based on public competition as the
only type of public advertisement. Therefore, equal access to jobs in government bodies is ensured,
as well as the principle of political neutrality and unbiased work of the government employees, which
is of particular importance when selecting best personnel.
Employment of government employees and civil servants is done through the bodies for human
resource management in the public administration – Directorate for Human Resources, as a central
part of human resource system organization. Directorate performs all activities in the area of human
resource management and is not responsible only for the maintenance of the employees’ system, but
also for its development. Function of this body is dispersed horizontally through the entire public
administration and in the same manner receives feedback from the entire public administration. Such
work technology provides concentration of relevant data, information and documentation on the
centrally, within the new body. The result is a Central Human Resource Records or database for all
procedures related to the position of individual government employee or civil servant.
Code of Ethics provides a set of standards and rules of conduct, which government employee and civil
servant should observe in performing government body’s activities. Additionally, the principle of loyalty
to the state has been established, as a postulate for performing government body’s activities;
performing activities primarily in the public interest, and protection of human rights and freedoms;
acting in an unbiased and politically neutral manner; appropriate conduct and treatment of the
customers, direct superiors and other employees have been established; obligations in case of the
conflict of interest; free access to information has been provided and obligation of keeping the
business secret; protection of property and means of work; maintenance of public confidence;
maintenance of the healthy life and work environment and other established principles and rules of
conduct.

                                                                                                      19
                                     Government of Montenegro


Appellate commission
The Appellate Commission has been established for the purposes of deciding the appeals against the
decisions upon rights and obligations based upon labour in line with the provisions of the Article 111 of
the Law on Civil Servants and Employees. The Commission was established by virtue of the
Government Decree (“Official Gazette of the Republic of Montenegro”, No. 69/04, 20/05, 59/05 and
53/07) and includes the representatives of the Ministry of Justice, Ministry of Finance, Ministry of
Health, Labour and Social Welfare, Secretariat for Legislation, Trade Unions for Public Administration
and Justice, judicial bodies and expert services. Any person with a University degree in Law and
minimum five years experience may be appointed the President or member of the Appellate
Commission for a four year period. The President or members of the Commission may not be eligible
for reappointment.
In line with the Law on Civil Servants and Employees the Appellate Commission submits the Annual
work report to the Government of Montenegro and the Ministry competent for administration affairs.

1.1.3.3. Coordination of European Integration Process
The Government, being aware of the need to modernize public administration and to perform its
continuous institutional adjustment to the EU integration process, has established three institutional
mechanisms for process coordination:
1. The bodies for coordination of European integration: 1) Collegium for European integration, as the
top Government’s political body governing the EU accession and dealing with the political and
strategic issues, and chaired by the Prime Minister; 2) Commission for European integration, chaired
by the Deputy Prime Minister for European Integration, as the main expert body for horizontal
coordination of the accession process, while also dealing with the coordination of pre-accession
assistance. The Deputy Prime Minister for European Integration acts at the same time as the National
IPA Coordinator – NIPAC; 3) Groups for European integration as main expert coordination bodies
competent for various areas of the Acquis, equivalent to the structure of sub-councils from the
Stabilization and Association Agreement (the Government rendered a decision on the establishment
of 7 taskforces for European integrations, ”Official Gazette of RMNE” No. 6/07).
2. Secretariat for European Integration (SEI) is competent for coordination of the European integration
process, legal support to the Stabilization and Accession Process, coordination of inter-ministerial
preparations for negotiations and coordination of negotiations with EU, coordination of preparation of
key documents related to the process, monitoring implementation of agreements signed with the EU
and the activities of joint bodies, established in line with these agreements, cooperation of state bodies
with the institutions and bodies of EU, Member States, Candidate States and future candidate states
over the Stabilization and Association Process, the cooperation with the Parliamentary bodies, and the
cooperation with the Mission of Montenegro to the EU in Brussels.
3. EU units are established in each ministry and are responsible for governance and coordination of
tasks related to the European integration in specific ministries and public administration bodies in
general.
The Ministry of Foreign Affairs is actively involved in the coordination of the European integration
process in the Government of Montenegro. It is also responsible for carrying out the political dialogue
with the EU and monitoring and adjusting Montenegrin positions to the common foreign and safety
policy of the EU and the European safety and defence policy. These operations are performed by the
Ministry of Foreign Affairs through the Department for EU and NATO, dealing with the European and
Euro-Atlantic integrations of Montenegro and carrying it out through the operations of two directorates:
Directorate for European Union and Directorate for NATO; as well as by the Mission of Montenegro to
the EU in Brussels.
Employment plan
                              Current -                 Planned number of employees
Institution                                   2007
                              planned                   2008      2009      2010       2011      2012
SEI – Coordination of EU      Current         19        27        33        39         44        49

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                                        National Program for Integration


accession process
Note: Employment plan for the SEI Department for Coordination of EU Assistance is provided in the chapter 3.22. NPI.




                                                                                                                       21
                                            Government of Montenegro



Financial requirements
                               2008              2009                  2010                2011                 2012
Budget funds                 219,328            284,203               360,740             426,881              482,626
International support       1,100,000
Note: The amount of international support provided in the table refers to the project “Alignment of legislation” from IPA 2007
funds. The support of other donors is also foreseen in this area.

1.1.3.4. Local Self-government – Decentralization
1.1.3.4.1. Status
Legislative framework
The Law on Local Self-Government (Official Gazette of the Republic of Montenegro No. 42/03, 28/04,
75/05 and 13/06), as a system law, provided for the establishment of the system of local self-
government compliant with the European Charter of Local Self-Government and adopted standards of
the European Communities, since citizen has become the main entity in local community for decision
making regarding the rights and responsibilities, in line with the competences stipulated by law. This
Law provided for the adoption of the principles from the European Charter of Local Self-Government,
related to decentralization, democratization, subsidiarity, levelling of hierarchy between central and
local bodies, principle of self-organization and principle of sustainable development. In line with the
stated principles, the following ones have been established: separation of legislative and executive
functions, individualization of responsibilities of the representing body, executive body and local
government body, and the responsibility of local officials, heads of the local government bodies,
thereby establishing legal conditions for a professional, depoliticized and efficient local self-
government.
In line with the Law on Local Self-Government the following have been adopted: Decree on official
functions of local civil servants and employees; Rulebook on the model and manner of keeping the
register on the unions of municipalities; Rulebook on the model and manner of keeping the register of
local communities and Rulebook on the official identification marks of the employed in local
government bodies.
The Law on Funding Local Self-Government (Official Gazette of the Republic of Montenegro, No.
42/03 and 44/03, Official Gazette of Montenegro, No. 4/08), in line with the Law on Local Self-
Government, has introduced a change in the manner of funding local communities. This Law provided
for the establishment of a system with the following aims: that local self-government obtains revenues
correspondent to their competences, that a significant part of these revenues originates from the local
taxes and provisions, that the sources of revenues for funding local self-government are diverse and
flexible, enabling the adjustment of real expenditure-related needs arising from the functions of local
self-government. For the municipalities with the budget deficit the equalization fund has been foreseen
to balance the funding of their needs. The Law has been adjusted with the provisions of the section 9
of the European Charter of Local Self-Government.
The Law on Mayoral Election (Official Gazette of the Republic of Montenegro, No. 42/03) has provided
for the election of Mayor, as a holder of executive function, from the part of citizens, through direct and
secret voting, and with the five year terms of office. The main principles of this Law are based upon
the principles defined in the Law on Local Self-Government regarding the distinction between the
competences of the Municipal Assembly, as citizens’ representing body performing the legislation
function, and the Mayor who performs the executive function.
The Law on Administrative Capital (Official Gazette of the Republic of Montenegro, No. 65/05) has
provided for the decentralization through establishing two municipal units as specific local self-
government units, with certain self-governance and administrative competences, and including the
same bodies as other municipalities. The municipal units, which basically have executive character,
represent the organizational units of the Administrative Capital, established to improve the efficiency in



22
                                   National Program for Integration


delivering services to citizens and the participation of citizens in performing certain operations of the
Administrative Capital.
The Law on Royal Capital (Official Gazette of the Republic of Montenegro, No. 56/93) has provided for
the issues specific for Cetinje, as a historical, cultural and religious centre of Montenegro. Having in
mind the significance of the Royal Capital, it is the obligation of the Parliament of Montenegro to
arrange that the headquarters of specific public, scientific and culture institutions are located in the
Royal Capital, while it is the obligation of the Government of Montenegro to define the headquarters
for specific ministries and other administration bodies in the Royal Capital.
The Work Program for Better Local Self-Government, adopted by the Government in 2005, defines the
activities related to the legal and institutional framework; supervision; expert structure of elected and
appointed civil servants; institutional dialogue; democratic participation of citizens in the public area;
leadership and strategic management; training of local civil servants and employees; funding of local
self-government and cross-border cooperation; further improvement of local self-government, for the
purpose of alignment to the EU law; implementation of regulations for provision of a democratic,
decentralized, transparent, responsible and efficient system of local self-government, responsive to
the needs of citizens and providing possibilities for local and economic development.
The Action Plan for Local Self-Government Reform for 2008 was adopted by the Coordination Board
for Local Self-Government Reform in January 21, 2008, thus defining the priorities related to the legal
and institutional framework in the area.
Institutional framework
The Ministry of Interior and Public Administration – Department for Local Self-Government – performs
the operations related to: the organization and scope of work of local self-government; functioning and
implementation of regulations from the area of local self-governance under the competences of this
Ministry; territorial organization of local self-government; international cooperation of local self-
government units with the local self-government units of other countries; cooperation with international
organizations and specialized bodies; implementation of international agreements related to local self-
governance; delivering opinion upon laws, other regulations or general acts defining the system of
state bodies and local self-government. Pursuant to the provisions of the article 125 of the Law on
Local Self-Government, the Ministry also supervises the operations of the local self-government
bodies – the Mayor and the Municipal Assembly.
The Coordination Board for Local Self-Government Reform (Official Gazette of the Republic of
Montenegro no. 14/07 and 22/07) monitors the decentralization and evaluates the process of local
self-government reform, on the basis of the following: Analysis of local self-government operations;
Analysis of local self-government functioning and Analysis on local self-government funding, adopted
by the Government on March 30, 2007. The Coordination Board is chaired by the Minister for Interior
and Public Administration, and the Board includes the Government representatives and the Union of
Municipalities representatives. As of October 23, 2007, the Coordination Board established the
following:
   Commission for Administration Decentralization, tasked with the defining priority operations in the
   public administration decentralization, in line with the Analysis of local self-government operations
   and the Analysis of local self-government functioning. The Commission is chaired by the Assistant
   to the Minister of Interior and Public Administration – Department for Local Self-Government.
   Commission for Fiscal Decentralization, supporting the Coordination Board in the overall legal and
   strategic framework for fiscal decentralization, in line with the EU standards and best practices of
   EU Member States. The Commission is chaired by the Assistant to the Minister of Finance.
   Commission for Cooperation at International and National Level that, based upon the defined
   priorities of the Coordination Board, in line with the Council of Europe standards, will establish
   expert level cooperation to implement the defined standards in the decentralization area and to
   start communication with donors for funding the projects of local self-government reform.
1.1.3.4.2. Short-term priorities


                                                                                                       23
                                      Government of Montenegro


The following shall be adopted in 2008:
-    Law on Election of Councillors and Members of Parliament,
-    Law on State Property, with the aim of harmonization to the provisions of the Article 116 of the
     Constitution,
-    Law on Territorial Organization of Montenegro,
-    Law on Changes and Amendments of the Law on Local Self-Government,
-    Law on Ratification of the European Charter of Local Self-Government,
-    Law on the Royal Capital,
-    Model of Program for Combating Corruption and Organized Crime within Local Self-government
     Units, with the Action plan of Measures for Preventing and Combating Corruption on the Local
     Level,
-    National Training Strategy (NTS), with the Action plan for implementation.
In 2008 some line laws related to the operations of local self-government shall be harmonized, in line
with the Action Plan for Local Self-Government Reform for 2008, adopted by the Coordination Board
for Local Self-Government Reform in January 2008 and adopted by the Government at the end of May
2008.
The activities in this period shall also refer to the following: strengthening administrative capacities of
the Ministry of Interior and Public Administration, particularly by recruiting new civil servants for the
Department for Local Self-Government; introduction and delegation of new functions to local self-
government; improvement of the system of lawfulness and quality in the operations performance,
through administrative resolving and inspection supervision and ratification of European Charter of
Local Self-Government and Madrid Framework Convention on Cross-border Cooperation and other
international acts related to cross-border cooperation.
Further activities will be directed to finishing the legislative framework, by: adopting the Law on the
Capital as the hystorical, cultural and spiritual center of Montenegro; the Law on Territorial
Organization of Montenegro and the Law Amending and Supplementing the Law on Local Self-
Government, which will, in line with the provisions of Art. 116, Paragraph 2 and Art. 117, Paragraph 2
of the Constitution of Montenegro, precisely regulate: local self-government affairs, scope, manner of
work, responsibility of deputy mayor, head administrator, the issue of property in general. This law
envisages the establishment of town as a special self-government unit.
1.1.3.4.3. Mid-term priorities
-    On the basis of analyses of legislation framework, and functioning and funding of local self-
     government, the degree of compliance of line laws to the Law on Local Self-Government shall be
     established, while the said laws are to be changed and amended, and adjusted to the EU law.
-    The measures and activities shall be taken to strengthen the National Union of Municipalities,
     through developing the dialogue mechanisms, in order to provide full contribution of
     representatives of local communities to the reform process.
-    The operations shall be conducted on setting up standards for transparency and communication
     with local communities, and ethics standards at local level and processes for its implementation
     and provision of civil participation in the most significant areas of decision making. The time frame
     for the Program of Strengthening Local Self-Government in Montenegro shall be conducted in line
     with the defined deadlines from the Strategy and Program for Better Local Self-Government.
-    The activities of the Government of Montenegro in further reform shall mainly refer to further
     development of market and civil society, rule of law and cooperation with international community,
     and one of conditions for that is a well-organized and well-managed reform of local self-
     government, including the introduction of changes which should, in a systemic and continuous
     fashion, improve and provide lawfulness, efficiency, effectiveness, cost-effectiveness and ethic
     dimension, as well as contents of the operations of local self-government.
-    To that end, further reform of local self-government in Montenegro shall be conducted for further
     and full harmonization of national law with the EU law, including the additional improvement of
     regulations in the area. Therefore additional efforts shall be made to harmonize the process of
     further reform of local self-government with the EU law and to conduct the implementation of

24
                                  National Program for Integration


   regulations in the area through the process of decentralization and implementation of programs
   pursuing further process of local self-government reform.

1.1.3.5. Reform of the Security Sector
1.1.3.5.1. Ministry of Defence
The defence is the new field of activity of the Government of Montenegro covered by the Ministry of
Defence.
Since it has been founded, the Ministry was dedicated to the completion of the defence reform
process and creation of the new concept of collective security. Military liability was cancelled; the
number of soldiers was decreased by approximately 54% in the last two years, so that it currently
amounts to approximately 2100 soldiers, in comparison to 2400, as was planned. The Ministry
undertook appropriate measures to resolve the issue of surplus of employees without social and
political consequences.
The new structure of the Ministry of Defence was determined, which is made up of departments for:
(1) defence policy, (2) human resources and legal operations, (3) material resources, (4)
Headquarters, as the special organisational units, as well as the divisions for: (1) defensive-security
operations, communication and crypto protection, and (2) inspection operations and internal controls,
as well as services for: (1) financial and material operations, and (2) professional, technical and
ancillary operations with total of 374 employed officers and employees. In that, accepting the
international standards, the decisions of disbanding former Military Intelligence and Military Safety
Service were adopted.
The Strategy of the National Security was adopted as the broadest strategic document in accordance
with national and security interests and objectives of Montenegro.
        The Montenegrin Defence Strategy was adopted as well as the following laws: the Law on
Defence (“Official Gazette of RMNE”, No. 47/07) and the Law on the Army of Montenegro (“Official
Gazette of RMNE”, No. 47/07). The activity on drafting 88 secondary legislation acts and planned
documents has started after the effectiveness of these laws for the purpose of their full
implementation. It is expected that these acts will be adopted in the prescribed timeframes, i.e. by the
end of the first half 2008, and the Defence Plan of Montenegro will be adopted within nine months
after the enactment of the appropriate secondary legislation act. In the first quarter of 2008, the
Government has established a draft Law on the Participation of the Members of the Army of
Montenegro, Civil Protection, Police and State Administration Employees in Peace-keeping Missions
and Other Activities Abroad, which was submitted to the Parliament for adoption.
Montenegro clearly defined its strategic goals, among which European and Euro-Atlantic integrations
represent the priority. Montenegro became the member of Partnership for Peace on 14 December
2006.
For the purpose of informing the public on security, economic and other advantages of the
integrations, and particularly membership in NATO, the Communication strategy for Euro-Atlantic
integrations was adopted.
The Government also established the Council for Partnership for Peace chaired by the Prime Minister
with co-chairing of the Minister of Foreign Affairs and Minister of Defence.
The Government also established the Committee for Interagency Cooperation, which is co-chaired by
the Ministry of Defence and Ministry of Foreign Affairs, which regularly meets and coordinates all
activities of Montenegro concerning Partnership for Peace programme. The practice of regular direct
reporting to Parliament was established by submitting an annual report on the work by the Minister of
Defense as well as by MPs visiting the Ministry of Defense and army units.
National Security Council was established in accordance with the new Constitution of Montenegro,
and the manner of its operations and decision-making has been regulated.



                                                                                                     25
                                    Government of Montenegro


The Ministry has already made the first important steps providing to NATO Presentation document of
Montenegro for Partnership for Peace and signing an Agreement on security of information with
NATO, which will facilitate future activities and cooperation.
Permanent Mission in NATO in Brussels and the Office for Cooperation within Partnership for Peace
in Mons were established as an important step in Euro-Atlantic integrations and the projection of
military and diplomatic network was developed.
Planning and Review Process (PARP) and Individual Partnership Programme (IPP) are given to
NATO, and Individual Partnership Action Plan IPAP is in its final phase.
Montenegro was delivered a partnership goals package by NATO, the implementation of which is
currently on-going.
Discussion Paper between Montenegro and NATO was drawn up after Montenegro received the
invitation to enter Intensified Dialogue in Buchurest.
Montenegro joined regional mechanisms of arm control (Vienna document 99, Ottawa Convention and
Agreement on Small arms and light weapons) and sub-regional mechanisms of arm control (Deyton
agreement).
The intensive cooperation with many members of NATO and Partnership for Peace programme has
been achieved. The special attention is paid to the cooperation in the area of the defence with the
countries in the region. In that respect, several bilateral agreements on cooperation in the area of
defence are signed (USA, Greece, Germany, the Netherlands, Denmark, Italy, Croatia, Slovenia,
Macedonia), and several more agreements on cooperation in the area of defence is under preparation
for signing (Bosnia and Herzegovina, Serbia, Albania, Turkey, Romania, Bulgaria).
ACSA and SOFA agreements were signed as well as the agreement with EUFOR. The signing of the
agreement with NATO on transit arrangements for the support to peacekeeping operations is
underway.
Montenegro established strategic partnership with USA during visit of USA Secretary of Defence,
Donald Rumsfeld on 26 September 2006. The cooperation is also achieved in the area of destroying
excess arms, as well as by partnership relations with National Guard of the State of Maine, and expert
assistance in development of strategic documents, education and training of Montenegrin Army for the
participation in peacekeeping operations abroad.
The realisation of the Programme for destroying excess arms – “MONDEM“ is underway, where the
partners are Government of Montenegro, OSCE, and UNDP.
With respect to the financial issues, Montenegro allocated 2.04% of GDP in 2007 for the defence
sector. Due to the expected growth in GDP, this amount should enable the implementation of reforms
and free functioning of the defence system without jeopardising the living standard of population and
economic growth. The Ministry allocated part of its budget for the activities within Partnership for
Peace programme for 2007.
Short-Term Priorities:
-    Complete legal regulation for the defence system and strategic documents;
-    Meet obligations concerning Partnership for Peace programme in qualitative and timely manner;
-    Make additional effort to meet the conditions for the programme MAP in 2008 – Membership
     Action Plan in NATO;
-    Inclusion in the full membership of SEDM and Adriatic Treaty (A-3);
-    Continue with the development of military diplomacy in cooperation with the Ministry of Interior
     Affairs;
-    Develop Action Plan for Partnership for Peace;
-    Implement Master plan for development of information technology in the defence area;
-    Implement programme for destruction of excess arms;
-    Determine organisational and formations structure of the Army with total of 2400 soldiers;


26
                                  National Program for Integration


-   Monitor realisation of the measures from the Action Plan for implementation of Communication
    Strategy;
-   Beginning to draw up the Strategic Defense Review;
-   Equipping the units of Army of Montenegro in line with NATO standards;
-   Introducing a multi-annual budgetary planning and development of the Planning, Programming and
    Budgeting Rule-Book.

Mid-Term Priorities:
-   Provide higher implementation of partnership goals and realisation of the undertaken activities
    from PARP;
-   Continue with the strengthening of good regional and defence cooperation, expand the
    cooperation at the bilateral level with the European countries;
-   Intensify the cooperation with USA and National Guard of the State of Maine;
-   Develop annual guide for defence planning and continue to work on the development of the
    system of defence planning, defence policy, financing and procedures in accordance with NATO
    standards;
-   Develop the capacities of the Ministry of Defence and staff education to qualify them for defence
    operations;
-   Develop mechanism for more efficient and qualitative cooperation with Parliament;
-   Purchase uniforms and new equipment for the purpose of modernising the Army and approach to
    the interoperability with NATO forces, revitalise the existing and continue the new infrastructure;
-   Improve the employees’ standards;
-   Provide education to staff;
-   Rejuvenate staff and supplement units with soldiers under contract;
-   Implement military cooperation;
-   Participate in manoeuvres by NATO standards and adopt the procedures;
-   Educate staff learn English language;
-   Train the Army members for the participation in peacekeeping and humanitarian missions.
1.1.3.5.2. Police
Bearing in mind the importance of the changes and the necessity of the reforms in all parts as a
precondition for joining the European Union, the Ministry of Interior Affairs and Public Administration
started the process of comprehensive reforms in accordance with the best practices and European
standards. In April 2002, the Ministry prepared a document titled “Basic strategies of Ministry of
Interior Affairs”. The assessment of the condition in the Ministry was performed and the
recommendations and directions of its development were prepared as well, i.e. the areas in which the
reform is required. The Ministry set the vision of police in the future as the strategic grounds for the
planning of reforms, as professional, depoliticised and efficient organisation under the democratic
control, which primary goal is the protection of the State and citizens under its jurisdiction.
The democratic reform continued through the adoption of the Law on Police (“Official Gazette of
RMNE” No. 28 /05) and the Law on Agency for National Security (“Official Gazette of RMNE” No.
28/05), which goal is the strengthening of professionalism, responsibility, transparency of organisation
and the manner of work. The laws completely meet the principle of decentralisation in accordance with
the international and legal standards, as well as the introduction of civil and parliamentary control of
the police work. In accordance with the above mentioned, the Decree on police education is approved;
the director of police is appointed; Code of police ethics is adopted and published; the Division for
internal controls and control of legality of application of police authorities was strengthened.
The performance of the police operations was transferred from the competence of the Ministry to the
independent entity-Police Directorate. In addition, the Office of the State Security was transferred from
the Ministry, and the Agency for National Security was established as a body sui generis. The Agency
performs the operations of the national security in accordance with the Law on the Agency for National
Security, which refers to the protection of the determined system regulated by the Constitution,


                                                                                                      27
                                      Government of Montenegro


security and the territorial integrity of Montenegro, human rights and freedom regulated by the
Constitution, as well as other operations of interest for the national security.
The Ministry kept normative, developmental and control and supervisory role in the areas of police
work and actions that resulted in the establishment of the Department for defensive and security
preparation and supervision. In addition, the authorities in the area of administration on interior affairs
are also kept (citizenship, personal IDs, registration of vehicles and drivers, arms, asylum, migrations,
etc.), which is under the competence of the Department for administrative interior affairs. The
competences of the Ministry are expanded to the area of state administration, local self-government
and extraordinary situations and civil security, which also resulted in the establishment of the
corresponding sectors.
Montenegrin police undertook the competence of uniting the state border at entire territory on 31
December 2003. The strategy of integrated management of border, and the Action Plan for its
implementation are adopted. The Law on the Supervision of the State Border is adopted, and
comprehensive training of government officers is conducted in the country and abroad. The civil
control of the borders is also strengthened. The conclusion of the agreement on cross-border police
cooperation is planned as well as the protocol on mutual patrols along the borders with the
neighbouring countries.
The Law on Amendments to the Law on Police will be adopted in 2008, which will be harmonised with
the Code on Criminal Procedure, and with all laws that are adopted in the meantime or that will be
adopted. The Law on Amendments to the Law on Supervision of the State Border will be adopted in
the same period, which will be harmonised with the security standards of the European Union on
crossing the state border, particularly with Decree 362/2006 of the European Parliament governing the
procedures for implementation of the law on Schengen borders.
The Decree on determining the areas of border crossing will be adopted, which will determine the area
of border crossing as a space that is needed for performing the border control with the premises
required for the normal and secure traffic, which is also the obligation under the Law on the
Supervision of the State Border. The adoption of the Decree on standards and conditions to be met by
border crossings and categorisation of border crossings will be also adopted, which will determine the
conditions of equipment of the border crossings so that they enable safe performance of the control
and customs monitoring in accordance with the standards.
Pursuant to the Project of reforms adopted by the Government in 2005, the activities on the reform on
Montenegrin police will continue. In that respect, the Decision on founding Police Academy was
adopted. In addition, permanent training of the police officers will continue through other forms of
education in the country and abroad. Therefore, the Government will review the Report on the
activities on organisation of education, qualification and professional training at Police Academy in
2008, which will give an insight in the activities of Police Academy on achieving the activities which
has been established for – education, qualification and professional training of the officers and
employees of the Police Administration and Ministry of Interior Affairs and Public Administration;
education, qualification and professional training of persons for performing the operations of customs
control, protection of persons and property, detective activities and other operations within the scope
of the activities of the Police Academy with the proposal for measures.

1.1.4. JUDICIARY

1.1.4.1. Status
Legislative framework
The Law on Courts (Official Gazette of the Republic of Montenegro No. 5/02, 49/04 and 22/08)
regulates the organization and jurisdiction of courts, as well as the manners and procedures for
electing judges, jurisdiction and composition of the Court Council, disciplinary procedures, termination
and discharge of the function, work organization of the courts, random allocation of cases, court
administration activities and court administration supervision.

28
                                  National Program for Integration


The Law on the courts Council (Official Gazette of the Republic of Montenegro No. 13/08) regulates
the manner of operation and implementation of the constitutional jurisdiction of the court Council. The
Court Council has been introduced as the constitutional category, with established composition and
jurisdiction that were significantly expanded compared to previous jurisdiction, providing increased
autonomy and independence of the judiciary.
The Law on the Public Prosecutor (Official Gazette of the Republic of Montenegro No. 69/03)
regulates the requirements and manner for appointing public prosecutors and deputy public
prosecutors by establishing Prosecutor’s Council, which determines proposals for appointing and
discharging public prosecutors and their deputies and submits the proposal and its rationale to the
Parliament, which is responsible for appointing and discharging, as opposed to the previous solution,
according to which the Public Prosecutor was elected by the Parliament, while other prosecutors were
elected by the Government upon the proposal of the Public Prosecutor. Significant novelty is the
establishing of the Department for the Fight against the Organized Crime, within Supreme Public
Prosecutor, managed by the special prosecutor for the fight against organized crime. Special public
prosecutor is appointed by Supreme Public Prosecutor among the public prosecutors and their
deputies, with his written consent and previously obtained opinion of the Prosecutors’ Council. The
manner for determining proposal of candidates for the public prosecutor and his deputy is closely
regulated by the Rulebook of the Prosecutors’ Council.
Organization and the working manner of the magistrate authorities is regulated by the Misdemeanor
Law (Official Gazette of the Republic of Montenegro No. 25/94, 29/94 and 48/99).
The Law on Protection of the Right to a Trial in a Reasonable Period of Time (Official Gazette of the
Republic of Montenegro No. 11/07) regulates the protection of the right to a trial in a reasonable time
period, as well a the legal satisfaction due to the violation of the right to a trial.
The Law on Education in Judiciary Bodies (Official Gazette of the Republic of Montenegro No. 27/06)
is in compliance with the Basic Principles of the Judiciary Autonomy, Recommendation on the
Independence, Efficiency and Role of the Judges of the Ministers’ Committee of the SE member
countries, European Charter on the Law on Judges, Opinion No. 4 on the Appropriate Initiative and
Subsequent Education of Judges on the national and European Level, of the Consultative Council of
the European Judges, and prescribes the initial and continuous training in judiciary bodies. The Law
also prescribes the institutional framework for the implementation of education through the
Coordination Board, program boards and the Center for Education in judiciary bodies, as the
organizational unit of the Supreme Court, which is responsible for the organization of the
implementation of education.
The Law on Notaries (Official Gazette of the Republic of Montenegro No. 68/05) is introducing the
institute of the notary as a public service in the legal system. This Law regulates the activities of the
notary, organization of the notary’s service, conditions for performing and reasons for termination of
the notary’s activities, supervision of the work of the notaries, disciplinary responsibilities of the
notaries and other issues significant for performing notary activities.
The Law on Advocacy (Official Gazette of the Republic of Montenegro No. 79/06) regulates the
advocacy as an autonomous and independent activity for providing legal aid, in compliance with the
Recommendation (2000) 21 of the Ministers’ Committee of the European Council of the member
states on the freedom of performing the lawyer’s profession. Significant novelty introduced by this
Law, in order to increase autonomy and independence of advocacy is the independence of the
Chamber of Lawyers in establishing lawyers’ tariff, while the amount of fees for defense upon official
duty is established by the Chamber of Lawyers with a special act, with the previous approval of the
Government.
Within the reform of the criminal legislation, the following legislations have been enacted: Criminal
Code (Official Gazette of the Republic of Montenegro No. 70/03 and 13/04), Code on the Criminal
Proceeding (Official Gazette of the Republic of Montenegro No. 71/03, 7/04 and 47/06), Law on
Witness Protection (Official Gazette of the Republic of Montenegro No. 65/04) and Law on
Responsibilities for Criminal Acts of the Legal Entities (Official Gazette of the Republic of Montenegro
No. 2/07 and 13/07). Criminal zakonikom is introducing novelties related to: the institute of minor

                                                                                                      29
                                     Government of Montenegro


social danger, force or threat, responsibility for criminal acts of the legal entities, new types of
penalties – work in the public interest, possibility of alternative fines, measuring fines in daily
amounts, limitations related to pronouncement of conditional conviction, while the special part of the
Law prescribes more severe fines for the criminal acts performed in the organized manner. In the
process criminal legislation, with the objective of creating legislative regulation with the principle of
providing guarantees and established rules that would ensure that no innocent person should be
convicted and that the perpetrators of criminal acts should be sanctioned, several new rights have
been introduced for the incriminated person. Thus, the incriminated person should be informed on the
criminal act with which he is charged and on the ground of reasonable doubt against him on the first
hearing, in order to be able to decide in which manner he will defend himself. Incarcerated person is
also guaranteed other rights: information on the reasons for incarceration on the languages that he
understands, right not to make any statement, to freely choose his defender, and the right for his
family to be informed on his incarceration. Public prosecutor has obtained a more active role in
proving criminal acts and prosecuting perpetrators, as the performer of the pre-criminal procedure,
with the objective of enabling the court to perform it basic function - lawsuit. Extorting statements on
which the court decision can be made has been banned, as well as special investigation techniques,
i.e. measures of secret surveillance. Special attention is given to the processing of criminal acts
performed in an organized manner; therefore, special rules for conducting criminal procedures for this
type of the most severe crime have been prescribed in details. Progressive development of the
international law has lead to the creation of new institutes that should be implemented in the
Montenegrin criminal legislation. Therefore, in 2006, changes and amendments of the Criminal Code
and Code on the Criminal Procedure have been introduced. The most significant changes and
amendments relate to the increased implementation of the principle of postponed criminal prosecution
towards minors and the increased implementation of the alternative sanction and harmonization of the
criminal acts against the safety of computer data.
The Law on Responsibility for Criminal Acts of the Legal Entities (Official Gazette of the Republic of
Montenegro No. 2/07 and 13/07) regulates the responsibility for criminal acts of the legal entities, as a
novelty in the legal system.
After assuming the exclusive jurisdiction for the legislative organization of the civil law, Montenegro
has started with the reform, with the adoption of the Law on Litigation Procedure (Official Gazette of
the Republic of Montenegro No. 22/04 and 76/06), Law on Executive Procedure (Official Gazette of
the Republic of Montenegro No. 23/04), Law on Arbitration (Official Gazette of the Republic of
Montenegro No. 30/05), Law on Notaries (Official Gazette of the Republic of Montenegro No. 68/05),
Law on the Extra-Judicial Procedure (Official Gazette of the Republic of Montenegro No. 27/06).
These laws are introducing new principles and process institutes in order to achieve more efficient and
better protection of violated and endangered subjective rights in the court proceedings. The Law on
Litigation Procedure introduces the accusation principle of the procedure, which is transferring the
burden of proving to the parties, improves solutions that regulate delivery, and introduces monetary
fines for disregard of the court. Specific deadlines have been shortened and clearly defined by the
Law, while specific activities can be performed up to the legally prescribed procedure stages, such as:
counter complaint, revoked complaint and the institute of standstill procedure has been abolished.
One of the most important novelties is the introduction of the possibility of arbitration, as well as
conclusion of court reconciliations even in the complaint procedures. Procedures before the arbitrage
are largely harmonized with the international standards. Therefore, Law on Arbitration has been
introduced as a lex specialis (Official Gazette of the Republic of Montenegro No. 30/05), which closely
regulates the arbitration procedure. New Law on the Executive Procedure has introduced the reform of
the executive procedure in order to adequately overcome inadequate solution in the area of court
executions.
Judiciary Reform Strategy 2007-2012 was adopted by the Government in June 2007. The Strategy
defines main objectives of the further judiciary reforms for the following five-year period. Key
objectives of the reforms are: strengthening of independence, efficiency and availability of judiciary,
and the increase of the public confidence in the judiciary. The Action Plan for implementation of the
Judiciary Reform Strategy envisages specific measures that should be undertaken for the

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implementation of these objectives and responsible bodies and implementation deadlines. Action Plan
was adopted by the Government in December 2007.
Institutional framework
Institutional framework of the judiciary system includes 15 main courts, two higher courts and two
commercial courts, Appellate, Administrative and Supreme courts. Administrative Office has been
established for performing administrative and financial activities for the needs of courts within the
Supreme Court. Public prosecution operations are performed by 13 main public prosecutors, two
senior prosecutors, Supreme Public Prosecutor and a Special Prosecutor for the fight against the
organized crime. Responsible for conducting magistrate procedure are 17 regional magistrate
authorities, ministries, public administration bodies and local self-government bodies, as well as the
Magistrates’ Council.
Chamber of Lawyers is the form of association and organization of lawyers, representing the interests
of advocacy in the judiciary system. In 2008, the Government will establish the Proposal of the
Changes and Amendment of the Law on Notaries, which will create legal conditions for the
introduction of this institute in the legal system of Montenegro, change the existing solutions, which
have shown deficiencies and limitation in the comparative legal systems in the region and have
represented a barrier in the work of notaries.
The Law on Education in Judiciary Bodies has transformed the Center for the Training of Judges in
the Center for Education in Judiciary Bodies.

1.1.4.2. Short-term priorities
Legislation
   In compliance with constitutional provisions, the Law on Changes and Amendments of the Law on
   the Public Prosecutor will be introduced, which will regulate the requirements for the election of the
   bearer of the judiciary function, in order to elect the best personnel for judiciary bodies, based on
   established requirements and therefore increase autonomy and independency of the judiciary.
   Program for solving delayed cases will be introduced
   In order to harmonize the Criminal Law with the EU legislation, changes and amendments of the
   Criminal Law will be introduced
   In order to establish the notary service in Montenegro, the Law on Changes and Amendments of
   the Law on Notaries will be introduced, as well as the Ordinance on the Work of Notaries and other
   required bylaws in order to enable organization of the examination for notaries, and select first
   notaries that will commence their work.
   Significant reform activities will be performed in relation to the introduction of the special law on
   judiciary for minors, which will provide a unique legislative framework for the organization of
   jurisdiction and procedure for the minors in conflict with the law.
   Changes and Amendments of the Law on Education in Judiciary Bodies will relocate to the Center
   for Education in the organizational unit of the Court’s Council.
   Considering the strengthening of efficiency, it is planned to introduce the Law on the Criminal
   Proceeding in a manner that will revise the role of the investigation judge in a pre-criminal
   procedure, while the conduction of investigation will be delegated to the public prosecutor. The
   Law should be adopted by 2008 and its implementation should start in 2009.
   Since the Law on Executive Procedure didn’t contribute to the efficiency of the executive
   procedure and since the annual ports on the work of courts show a large number of unsolved
   executive cases, the Law on Changes and Amendments of the Law on the Executive Procedure
   will be introduced.
   Annual education program and special education programs will be prepared based realistically
   determined needs for education in specific areas, particularly in the area related to preparations for
   assuming obligations fro the European partnership.
   Regarding the reforms of magistrates system, the Misdemeanor Law will be adopted by 2009. This
   Law will regulate a new organization manner of the bodies that are conducting magistrate’s

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     procedure, in order to increase efficiency of these bodies. Additionally, this Law will be harmonized
     with the modern principles of the Magistrate Law and international documents.
     Manner of conducting court and prosecution statistics will be reviewed and the appropriate model
     of maintaining statistics reports on the work will be established regarding the data that should be
     included in order to use the work report data for qualitative and quantitative monitoring of the work
     of judiciary bodies.
     Representation of the state in the property and legal disputes shall be normatively regulated.


Institutions
     Court’s Council will be established as an autonomous and independent body as well as the
     Secretariat of the Court’s Council as the organizational unit for support of the implementation of
     Court’s Council jurisdictions,
     Center for Education of Bearers of the Judiciary Function will be transformed in the organizational
     unit of the Court’s Council,
     Monitoring Commission will be established for monitoring measures included in the Action Plan for
     the implementation of the Judiciary Reform Strategy,
     In compliance with the Law on the Changes and Amendments of the Law on the Public Prosecutor
     and a new Law on the Criminal Procedure will establish the adequate number of public
     prosecutors and their deputies for the efficient conducting of the investigation under the public
     prosecution,
     Strengthening of capacities of the Special Public Prosecutor by increasing the number of special
     prosecutor’s deputies and their specialization for the specific forms of organized crime and
     corruption,
     Court executors services will be reorganized in compliance with the changes of the Law on
     Executive Procedure,
     New body for representation of state property interest of Montenegro shall be established, and
     personnel, premises, equipment and financial resources for its operation will be provided,
     In the Ministry of Justice capacities will be strengthened to perform European integration activities
     and monitoring harmonization of regulations with the EU legislation, which will require the increase
     of the number of employees and training of the existing employees,
     In 2008, Judiciary IT System Project will be implemented and the IT system will be established,
     required personnel will be provided and monitoring of functioning of the judiciary IT system will be
     centralized,
     First notaries will be appointed during 2008 and the Chamber of Notaries will be established.
Mid-term priorities
Legislation
From 2010 -2012
   New Law on Courts and Law on the Public prosecutor will be adopted in order to rationalize court
   and prosecution network, in relation to real and regional jurisdiction and specialization for specific
   legal areas,
   In 2010, changes of the Law on Advocacy should be adopted in order to achieve compliance with
   the Directive 31977L0249 and 31998L0005 in respect of creating conditions for undisturbed
   representation of foreign lawyers before judiciary bodies,
   The Law on Protection of Damaged Parties in the Criminal Procedure will be introduced, in
   compliance with the Directive 32004L0080,
   In compliance with the new Misdemeanor Law, bylaws will be implemented for its implementation
   Analyze the level of implemented reforms for the period 2008-2009 and continue with the reforms’
   implementation,
   Review the level of compliance of regulations with the EU legislation, and prepare the plan of
   required regulation changes according to the compliance level, in order to achieve full compliance.


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                                   National Program for Integration



Institutions
   Reorganization of courts and public prosecution will be performed in compliance with the changes
   of the Law on Courts and the Law on the Public Prosecutor,
   Fund for compensation of the victims of criminal acts will be established,
   Bodies responsible for conducting magistrate procedure will be reorganized in compliance with the
   new Misdemeanor Law.



1.1.5. ANTI-CORRUPTION MEASURES

1.1.5.1. Current status
Programme and Action Plan for the Fight against Corruption and Organized Crime
The Government of Montenegro passed the Programme of the Fight against Corruption and
Organized Crime (August 2005) and the Action Plan for Implementation of the Programme of the
Fight against Corruption and Organized Crime and it formed a body to monitor implementation of
the Action Plan – National Committee for Implementation of the Action Plan for Implementation of the
Programme of the Fight against Corruption and Organized Crime (February 2007), which includes
highest-ranking representatives of the legislative, executive and judicial power, as well as
representatives of the non-government sector.
The Action Plan for Implementation of the Programme of the Fight against Corruption and Organized
Crime is a mid-term document projected for the period of three years. It constitutes specific measures
and activities, responsible bodies and institutions, deadlines, success indicators and risk factors. While
being developed, the special attention was paid to: Council Decision on Principles, Priorities, and
Conditions contained in the European Partnership of 28 January 2007, UN Convention against
Transnational Organized Crime, UN Convention against Corruption, European Convention for
Protection of Human Rights and Fundamental Freedoms, Council of Europe’s Resolution (97) 24 on
Twenty Guiding Principles against Corruption (GRECO); Principles for Improving the Fight against
Corruption in acceding, candidate and other third countries. Representatives of the non-government
sector were involved in development of both the Programme and the Action Plan for its
implementation.
In July 2007, the Government of Montenegro approved the First Report on Realization of Measures
from the Action Plan for Implementation of the Programme of the Fight against Corruption and
Organized Crime, for the period September 2006 – May 2007. The Second Report on Realization of
Measures from the Action Plan for Implementation of the Programme of the Fight against Corruption
and Organized Crime for the period September 2006 – December 2007 was approved in March 2008.
The Parliament of Montenegro has enacted the Resolution on the Fight against Corruption and
Organized Crime (Official Gazette of MNE, No. 02/08) by which, among other things, it has
expressed its readiness to get involved, with all its capacities, in setting up the national anti-corruption
legislation and in establishing as close international and regional cooperation in the field of fighting
corruption and organized crime as possible. At the same time, in accordance with responsibilities
assumed at the Regional Conference of Southeast Europe, GOPAK-Global Organization of
Parliamentarians against Corruption, it has committed itself to establish a national branch of
parliamentarians in the fight against corruption, which would include representatives of all working
bodies of the Parliament.
Legislative framework
By carrying out a comprehensive judiciary reform and by enacting the Criminal Code and the Criminal
Procedure Code, the Law on Witness Protection, as well as the Law on Liability of Legal Entities for
Criminal Offences, Montenegro conducted an important reform of criminal legislation. Through
successful cooperation with the Council of Europe, OSCE, UNDP and other international
organizations in preparing and developing aforementioned legal arrangements, the Montenegrin

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                                     Government of Montenegro


criminal legislation was harmonized with numerous international documents and standards in this field.
The Criminal Procedure Code constituted the Special Prosecutor for the fight against organized crime
and introduced use of modern devices and methods in evidence gathering procedure, which is of
extreme importance for the procedure of proving criminal offences of corruption. With regard to the
Law on Witness Protection, it should be emphasized that this subject is defined for the first time in the
legal system of Montenegro, which ensures efficient fight against corruption and organized crime.
In compliance with the Law on Prevention of Money Laundering and Financing Terrorism (Official
Gazette of MNE No. 55/03, 58/03 and 17/05, Official Gazette of MNE, No. 4/08), the Agency for
Prevention of Money Laundering and Financing Terrorism was established, as an autonomous and
operational body that performs duties with regard to taking activities and measures for prevention and
fight against money laundering. With the Law on Amendments of the Law on Prevention of Money
Laundering, this law was extended with provisions on prevention of financing terrorism, by which the
positive legislation in this field was almost completely harmonized with requirements of international
organizations and institutions.
Within public administration reform and the Public Administration Reform Strategy 2002 - 2009, a
whole series of system laws was enacted, by which a significant progress was made with respect to
anti-corruption as well (the Law on Public Administration, the Law ob Public Servants and State
Employees, the Law on Salaries of Civil Servants and State Employees, etc.). With foundation of the
Human Resource Agency, as a body that has an important function in continuous improvement of
servants and employees in the public administration, special education programs on prevention and
repression of corruption have also been conducted. Adoption of the following laws is also important for
the reform process in this sector: the Law on General Administrative Procedure, the Law on
Administrative Dispute, the Law on Inspection Supervision, the Law on Defender of Human Rights and
Freedoms, as well as foundation of the Administrative Court. Within inter-institutional cooperation,
data exchange mechanisms between police, prosecutor’s office and judiciary have been improved in
order to ensure more efficient monitoring of activities of these bodies, particularly in relation to
processing and trying for criminal offences of corruption.
Important anti-corruption laws also include the Public Procurement Law, the Law on Financing Political
Parties, the Law on State Auditing Institution, the Law on Conflict of Interests and the Law on Free
Access to Information.
Institutional framework
The National Committee for Monitoring the Execution of the Action Plan for Implementation of
the Programme of the Fight against Corruption and Organized Crime (Official Gazette of MNE,
no. 15/07) was formed with the task to manage, organize and synchronize activities of public agencies
and other relevant institutions in implementation of the Action Plan. The National Committee set its
working methodology and a plan for regular monthly reporting (until the 10th in the month) for all
institutions involved in implementation of the Action Plan.
In accordance with the Law on Conflict of Interests (Official Gazette of MNE, No. 42/04 and 17/05), the
Committee for Identifying the Existence of Conflict of Interest was formed, which meant that
necessary prerequisites were met for successful implementation of the Law, whose basic goal has
been to increase the level of trust into legitimate and impartial execution of power, with adherence to
ethic norms and codes of conduct. The Parliament formed the Committee for Identifying the Existence
of Conflict of Interest as an independent body (Official Gazette of MNE, No. 53/04), which consists of
a chairman and four members, for the period of 5 years and with a possibility of reappointment. Rules
on the Procedure before the Committee for Identifying the Existence of Conflict of Interest and
Committee’s Procedural Rules were adopted. The Committee has published the following forms:
Disclosure form on income and property, Registry of disclosure forms of income and property of public
officials and Report on a received gift. A data base was developed together with CEMI NGO and
published data are available via the Internet (www.konfliktinteresa.cg.yu). The Committee files an
Activity Report to the Parliament of MNE once a year. The first report was approved on 26 July 2006,
and the second on 13 June 2007.


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                                   National Program for Integration


The Commission for Control of Public Procurement Procedure provides conditions for economic,
efficient and transparent use of public funds and creation of competitive and equal conditions for all
bidders. In addition, this Commission performs the following duties: monitors and analyzes realization
of the public procurement system from the perspective of its harmonization with the EU law and
proposes measures that ensure such harmonization; gives prior approval to procurement officials with
regard to selection of procedure in cases defined by this law; publishes calls for bids and decisions on
awarded contracts on the Internet page of this administration body in cases defined by the law;
informs State Auditing Agency and files reports to other relevant bodies on cases of infringement of
the public procurement procedure it uncovers while performing duties from its jurisdiction.
The Agency for Anti-corruption Initiative performs administrative tasks related to the following:
advertising and preventive actions, such as to increase public awareness about the problem of
corruption and conduct surveys on the scope, manifested forms, causes and mechanisms of
corruption occurrence; cooperation with relevant bodies aimed at development and implementation of
legislative and programmatic documents of importance for prevention and containment of corruption;
cooperation with NGOs and private sector with the purpose of corruption containment; cooperation
with government agencies in the procedure following reports of corruption that the Agency receives
from citizens and other entities; making proposals to the Government to sign and apply European and
other anti-corruption international standards and instruments; monitor implementation of
recommendations made by the Group of States against Corruption of the Council of Europe
(GRECO); coordination of activities resulting from application of the United Nations Convention
against Corruption, execution of other activities resulting from the membership in the Stability Pact for
Southeast Europe and other international organizations and institutions, as well as other duties
defined under its jurisdiction.
Together with the Ministry of Education and Science, the Agency for Anti-corruption Initiative
organized lectures on corruption at higher education institutions in Montenegro. In February 2006, a
special telephone line was opened for citizens to report corruption and to offer them legal aid with
respect to procedures they have at their disposal to protect their own rights. Also, a network of contact
persons from relevant government bodies for containment of corruption was created and advertising
and prevention materials were distributed (billboards, posters, brochures, publishing in daily papers,
etc). In accordance with the aforementioned activities, in June 2007 the Government of Montenegro
passed the Report on Implementation of the Project “Institutional capacity building of the Agency for
Anti-corruption Initiative to deal with cases of reported criminal offences of corruption”, which
emphasized the need for the Agency to continue with the aforementioned activities for the purpose of
taking even more efficient, preventive actions.
In October 2006, Montenegro deposited the instrument for joining the UN Convention against
Corruption with UN General Secretary. In accordance with the Action Plan for Implementation of the
Programme of the Fight against Corruption and Organized Crime, one of the duties of the Agency for
Anti-corruption Initiative is related to harmonization of the Montenegrin legislation with provisions of
the UN Convention against Corruption. The obligation to harmonize our legislation with this
Convention represents also one of priorities defined in the European Partnership for Montenegro. The
Agency for Anti-corruption Initiative carried out this activity in cooperation with the Office of the United
Nations Development Programme (UNDP) and Organization for Security and Cooperation in Europe
(OSCE)/Montenegro Mission, through which expert opinions of UNODC, SIGMA and UNCITRAL
about criminal legislation, the Law on Public Procurement and the Law on Conflict of Interest were
obtained. Those opinions show high degree of harmonization of those laws with the UN Convention
against Corruption, with exception of the Law on Conflict of Interests, which needs to be improved and
innovated.
With respect to the Criminal Law Convention of the Council of Europe on Corruption, the first and the
second round of GRECO evaluation were conducted in Montenegro and GRECO’s Report was
approved in 2006. In accordance with the aforementioned, the Government of Montenegro instructed
the Agency for Anti-corruption Initiative to coordinate activities related to implementation of 24
mandatory recommendations from the Report. As far as other two documents of the Council of Europe
are concerned, the Law on Ratification of Additional Protocol to the Criminal Law Convention of the

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                                      Government of Montenegro


Council of Europe on Corruption has been enacted and the Law on Ratification of Additional Protocol
to the Civil Law Convention on Corruption is in the parliamentary procedure.
Given the need to analyze the phenomenon of corruption in detail, as well as its manifested forms in
areas in which it occurs, the Agency for Anti-corruption Initiative has initiated, together with the UNDP,
a survey on corruption in the judiciary, and in the course of the next year it will carry out surveys in
education, local governance and health systems. Analysis of surveys’ results will be presented to the
public and will serve as a basis for defining future, preventive anti-corruption activities.
At the international level, Montenegro has established intensive cooperation with international
organizations and institutions important for the fight against corruption. By signing the Agreement and
the Action Plan in 2000, Montenegro became a full member of the Stability Pact Anti-corruption
Initiative (RAI). Together with other members of RAI, Montenegro signed the Declaration on Ten Joint
Measures in the Fight Against Corruption in Southeast Europe, in May 2005 (Brussels Declaration),
and the Memorandum of Understanding with regard to cooperation in the fight against corruption in
Southeast Europe (April 2007, Zagreb), which confirmed the principle of “regional ownership” by
member countries. In October 2007, Montenegro hosted the meeting of the Steering Committee of this
initiative for the second time, on which occasion it was decided that the director of the Agency for Anti-
corruption Initiative would preside over this initiative in the following two years.
Since June 2006, Montenegro has been a full member of GRECO (Group of States against Corruption
of the Council of Europe), through which implementation of the Council of Europe conventions against
corruption is monitored, and Montenegro will submit the next report on implementation of
recommendations of this body in late May 2008. Continuous cooperation in this field is accomplished
through joint projects with OSCE/Montenegro Mission, UNDP/Montenegro Office, the Council of
Europe/Montenegro Office, EAR/Montenegro Office, US Embassy and others. Also, Montenegro has
been carrying out numerous anti-corruption activities through participation in projects oriented towards
strengthening administrative and human resource capacities for the purpose of successful accession
to EU (IPA, IRI, and etc).

1.1.5.2. Short-term priorities
     The Law on Containment of Conflict of Interest in Performing Public Function will be enacted,
     which will regulate existence and method of containing conflict of interest, procedure in the case of
     conflict of interest occurring, measures for containment and generation of conflict of interest by
     people who perform public functions, as well as other matters. Relevant standards and particularly
     the UN Convention against Corruption and recommendations of the Group of States against
     Corruption of the Council of Europe (GRECO) will be used in drawing up the bill. This law will refer
     to all public officials and related person.
     The Law on Protection of Persons Who Disclose Corruption will be enacted, which will set up
     measures that guarantee confidentiality and protect persons who disclose corruption from negative
     consequences. Institution of legal protection for those persons should significantly help efforts
     aimed at prevention and disclosure of corruption.
     Adopting, amending and supplementing the Action Plan for Implementation of the Program of the
     Fight against Corruption and Organized Crime for the period 2008-09; as well as regular semi-
     annual reporting on the implementation of the Action Plan and work of the National Commission.

1.1.5.3. Mid-term priorities
     Establishing the Program for Combating Corruption and Organized Crime for the period 2010 -12
     and Action Plan for its implementation;
     Amendment of all anti-corruption laws and other laws related to the efficient fight against
     corruption and organized crime in accordance with the European standards, as well as their full
     implementation,
     Continuous strengthening of administrative capacities by means of appropriate education
     programmes, expert support and procurement of equipment in the field of the fight against
     corruption,

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                             National Program for Integration


More intensive involvement of the civil society and media in joint anti-corruption activities and
raising awareness about importance of the fight against corruption.




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                                     Government of Montenegro



1.2. HUMAN RIGHTS AND PROTECTION OF MINORITIES


Background
The Constitution of Montenegro offers legal basis for promotion, reinforcement and improvement of
protection of fundamental human rights and freedoms and confirms Montenegro’s commitment to
abide by international standards in that context. Almost half (68 out of 158) articles in the Constitution
refer to human rights and freedoms, which normatively verifies their significance.
Basic provisions of the Constitution include 3 provisions, crucial for exercising human rights and
freedoms. Article 6 gives a general guarantee for protection of human rights and freedoms as
inviolable categories. Article 7 prescribes prohibition of infliction of hatred or intolerance on any
ground, and Article 8 prescribes prohibition of discrimination as a general precondition to exercise
human rights and freedoms.
The second part of the Constitution includes 65 articles dealing with human rights and freedoms, civil
and political, economic, social and cultural, as well as with rights of minorities.
In addition to national legislation, which guarantees respect of human rights and freedoms, as well as
rights of minorities, with Article 9 of the Constitution Montenegro has specified that ratified and
published international agreements and generally accepted rules of international law are an integral
part of the internal legal order and they have the supremacy over the national legislation and are
directly applicable when they regulate the relations differently from the internal legislation.
Regarding UN instruments, they include: the Covenant on Civil and Political Rights, with both optional
protocols, as well as the Covenant on Social, Economic and Cultural Rights, the Convention relating to
the Status of Refugees, with the Protocol, the International Convention on the Elimination of all Forms
of Racial Discrimination, the Convention on the Elimination of all Forms of Discrimination against
Women, Convention on the Rights of the Childe, the Convention against Torture, and other Cruel,
Inhuman or Degrading Treatments or Punishments. Montenegro is also bound by Universal
Declaration of Human Rights, but not as a contractual but rather an international custom law
requirement.
Regarding the Council of Europe instruments, they include: the European Convention for the
Protection of Human Rights and Fundamental Freedoms, the European Convention for the Prevention
of Torture and Inhuman or Degrading Treatment or Punishment, the Framework Convention for the
Protection of National Minorities, the Charter for Regional or Minority Languages, the European Social
Charter.
Preconditions for exercising human rights and freedoms
a) Equality and equal protection of law
Legislative framework
In accordance with the Constitution (Art. 8 and Art. 17) and ratified international agreements, everyone
is deemed equal before the law and prohibition of any discrimination, direct or indirect, on the grounds
of any peculiarity or personal characteristic is guaranteed.
Institutional framework
Pertinent institutions for enactment of this systemic general regulation include relevant ministries and
pertinent government agencies, as well as bodies of the Parliament of Montenegro.
Short-term priorities
Enactment of the Law on Prohibition of Discrimination by the end of 2008, which will introduce
measures of prohibition for direct or indirect discrimination on any grounds, in order to promote and
build in the legal system the culture of diversity, tolerance and equality among the citizenry of
Montenegro, as a systemic legal regulation about the fundamental principle for exercising all human
rights and freedoms, is a prerequisite for implementation of the existing legislation.

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                                    National Program for Integration




Mid-term priorities
Harmonization of regulations with the Law on Prohibition of Discrimination and strengthening of
mechanisms and capacities for implementation of the law will be in focus of mid-term activities.

b) Gender Equality
Legislative framework
Enactment of the Constitution of Montenegro offered a strong basis for introduction and regulation of
gender equality. The Constitution specifies that the state guarantees the equality of a woman and a
man and develops the equal opportunity policy (Article 18).
The Parliament of Montenegro has enacted the Law on Gender Equality (Official Gazette No. 46/07).
This Law specifies the manner of ensuring and exercising rights on the ground of gender equality, in
compliance with international regulations and general rules of the international law, as well as
measures for elimination of discrimination on the grounds of sex and creation of equal opportunities
for participation of women and men in all spheres of social life. The Law establishes a public
administration body responsible for activities related to accomplishing gender equality and this is the
Ministry for Protection of Human and Minority Rights. The law also emphasizes the role of the civil
sector and offers considerable space for actions of non-governmental organizations in total activities
aimed at accomplishing gender equality.
Institutional framework
The Gender Equality Office was established by the Government’s Decree on 27 March 2003 (Official
Gazette of the Republic of MNE, No. 24/04) and it is an integral part of the Government’s General
Secretariat. The Gender Equality Office has a mandate to create conditions for ensuring gender
equality in accordance with defined standards and responsibilities assumed through international
agreements, harmonization of all activities in this field and establishment of cooperation with
international and non-governmental organizations involved in matters of gender equality and human
rights of women.
The Committee for Gender Equality of the Parliament of Montenegro was formed on 11 July 2001, as
a permanent working body of the Parliament with the following mandate: “The Committee for Gender
Equality reviews and monitors exercise of human and citizen freedoms and rights specified by the
Constitution that are related to gender equality, and above all: reviews bills and other documents
important for exercising the principle of gender equality, encourages application and realization of this
principle in Republic’s laws; encourages and proposes signing of international documents about
gender equality and monitors implementation of those documents in the Republic; proposes measures
and activities for improvement of gender equality, particularly in the fields of education, healthcare,
public information, social policy, employment, entrepreneurship, family relations, decision-making
processes and similar; participates in preparation and development of documents and in
harmonization of legislation in this field with EU standards and legislation; cooperates with NGOs
involved in gender equality matters.”
A training program on gender equality for public officials and state employees from government
agencies of Montenegro is being carried out. The goal of the programme is to contribute to formation
of a critical mass of employees in government agencies who will improve their knowledge about the
problem of gender equality and then contribute to introduction of the gender equality trend in all areas
of the national policy.
Development of the National Action Plan for Accomplishing Gender Equality (NAP) is under way. This
document is being developed in cooperation with women NGOs. The NAP represents a development
document for implementation of the gender equality policy. It is based on international and domestic legal
sources that treat the problem of gender equality. The following action areas have been identified in the NAP:
education, healthcare, violence against women, economy and sustainable development, politics and decision-
making, media and culture and institutional mechanisms for definition and implementation of gender equality

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                                     Government of Montenegro


policies. A strategic goal, development goals, as well as operational goals for the next two years will be
specified for each area in the NAP.
Short-term Priorities
     Enactment of the National Action Plan for Accomplishing Gender Equality in MNE 2008 -2012 in the
     first half of 2008;
     Enhancement of administrative capacities of the Gender Equality Office of the Government of
     MNE; two persons will be employed in 2008;
     Introduce the gender equality trend in all areas of the national policy;
     Translation and publication of Acquis Communautaire in the field of gender equality;
     National legislation will be harmonized with provisions of the Law on Gender Equality and
     regulations of EU, Council of Europe, as well as with other international documents from the
     domain of gender equality;
     Efforts will be stepped up to suppress all forms of violence against women, organize a safe haven
     for victims of family violence, support research and information dissemination about all forms of
     violence against women;
     Institutional mechanisms for implementation of the gender equality policy at local level will be
     established;
     Cooperation between the Gender Equality Office, other government agencies, parliamentary
     Gender Equality Committee and institutional gender equality mechanisms at local level will be
     strengthened;
     Gender segregated statistical indicators will be established and statistical data categorized by
     gender will be published;
     Training programmes about gender equality matters will be carried out;
     Cooperation with NGOs active in the domain of gender equality will be continued, for the purpose
     of reinforcing the role and importance of the civil society.
Mid-term Priorities
     Activities from the National Action Plan for Accomplishing Gender Equality in Montenegro 2008 -2012
     will be carried out;
     Introduction of the gender equality trend in all areas of the national policy will be continued;
     The EU and Council of Europe regulations, as well as international documents from the domain of
     gender equality will systematically be monitored and implemented;
     The administrative capacities of the Gender Equality Office will be enhanced, three more people
     will be employed in the period 2008 – 2010;
     Institutional mechanisms for implementation of the gender equality policy in all local governments
     will be established.


c) Children’s Rights
Legislative framework
Montenegro is fully committed to exercising full promotion and protection of children’ rights. The
Constitutional provision (Article 9) guaranteeing the primacy of ratified international agreements over
national legislation, whereby securing a direct implementation of recognized international instruments,
incuding the UN Convention on the Rights of the Child, is an expression of committment of the state to
set up true guarantees for the full protection of all of its citizens, including children as a group
deserving special protection.
The Constitution also guarantees that children shall enjoy rights and freedoms appropriate to their age
and maturity, as well as special protection from mental, bodily, economic or any other exploitation or
abuse (Art. 74). The Constitution also guarantees the right to education on equal terms (Article 75).
Primary education is obligatory and free. Mothers and children enjoy special protection (Article 73).
The Constitution also guarantees the right to medical care (Article 69).

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Children’ rights and their protection are defined by numerous laws, includingThe Law on Social and
Child Care (Off. Gazette of RMNE, No. 78/05); the General Education Law (Off. Gazette of RMNE, No.
64/02); the Law on Education of Children with Special Needs (Off. Gazette of RMNE, No. 80/04); the
Law on Pre-School Education (Off. Gazette of RMNE, No. 64/02 and 49/07); the Law on Primary
Education (Off. Gazette of RMNE, No. 64/02 and 49/07); the Law on Grammar Schools (Off. Gazette
of RMNE, No. 49/07); the Law on Medical Care (Off. Gazette of RMNE, No. 39/04) and the Law on
Family (Off. Gazette of RMNE, No. 01/07).
An important part of legislative framework of relevance for children’ rights issues and their protection
consists of numerous strategies, national plans and programs: National Plan of Action for Children
(2004); National Plan of Action for the Young (2006); Strategy for the Development of Social and Child
Care System (2007); Strategy for the Development of Health Services in Montenegro (2003); National
Program for the Prevention of Violence (2003); HIV/AIDS Strategy (2004); Strategy for the
Preservation and Improvement of Reproductive Health (2005); Strategic Plan of Education Reform for
the period 2005 - 09 (2005); Strategy for Combating Trafficking in Human Beings (2003); Strategy for
Integration of Persons with Disabilities in Montenegro 2008-16 (2007); Strategy for Improving the
Position of RAE Population in Montenegro 2008-12 (2007); Development and Poverty Reduction
Strategy (2003); amendments and supplements to the Criminal Code and the Law on Criminal
Procedure of Montenegro on the application of alternative measures for minors who have violated the
law, as well as secondary legislation - Rule - Book on the Application of Corrective Instructions.
Institutional framework
The Ministry of Health, Work and Social Care is competent for the protection of mothers and children.
Inter-agency authority - Council for the Rights of Children was established in 2007 and it is chaired by
the Minister of Health, Work and Social Care. It is the role of the Council to be the main coordination
authority at the national level for children rights issues and their protection. Public institutions - centers
for social care provide for the implementation of appropriate social and child care policies and provide
social and child care services. Accomodation in child and social care institutions is still a predominant
manner of caring about children without parental care and children with developemental delays.
The Ministry of Education and Science is competent for the preschool, primary and secondary
education policy, whereas the protection of children’s rights is under the competence of the Ministry of
Justice, Ministry for the Protection of Human and Minority Rights and Ministry of Internal Affairs and
Public Administration.
There is a permanent Committee for Human Rights and Freedoms within the Parliament of
Montenegro, which has the competence to examine drafts and final drafts of laws, declarations,
resolutions and other acts in the domain of human rights and freedoms protection.
The Protector of Human Rights and Freedoms in Montenegro has a special role in the protection of
fundamental rights and freedoms, including children’s rights.
Short-term Priorities
–   Adoption of Law on the Protection from Domestic Violence.
–   Harmonization of the Law on Social and Child Care and appropriate secondary legislation with the
    UN Convention of Children Rights and with the relevant international standards.
–   Strengthening the capacities of the National Council for the Rights of Children.
–   Intensifying the process of transformation of child and social care institutions and developing
    alternative forms for the protection of children in family and local community
–   Expanding the network of daycare centers for children with developmental delays
–   Improving statistical data referring to children
–   Including children with developmental delays, Roma children and all other marginalized children
    into the inclusive education process.

Mid-term Priorities
–   Implementation of a comprehensive reform of juvenile judiciary system, including the adoption of
    a special Law on Juvenile Judiciary.

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                                      Government of Montenegro


–    Establishment of alternative forms for the protection of children in family and local community,
     both of children without parental care and other children which are accomodated in child care
     institutions – including the creation of a network of foster care families and promotion of adoption
     as an institution.
–    Introduction of additional social programs with the objective to supplement the existing services
     for children - temporary shelters for children and mothers victims of violence and trafficking in
     humans, crisis and advisory centers.
–    Training and strenghtening the capacities of employees with the objective to successfully apply a
     wide spectrum of child protection services, education and early children development.
–    Adoption and expansion of DevInfo database as a standard instrument for collecting data on
     children.
–    Improving the quality of pre-school programs and expansion of pre-school infrastructure with
     emphasis on inclusion of vulnerable and marginalized children.
–    Introducing early learning and development standards for all five-year olds as a part of overall
     strategy for preparing young children for school.
–    Improving the quality of primary education through further modernization of school programs and
     application of modern studying methods in all primary schools in the country and updating of
     quantitative and qualitative standards.

1.2.1. CIVIL AND POLITICAL RIGHTS
Legislative framework

1.2.1.1. Respect of Dignity and Inviolability of the Physical and Psychological Integrity
of the Personality
Capital punishment is prohibited by article 26 of the Constitution of Montenegro, which is in
accordance with the liabilities undertaken in relationship with the European Council.
Right of Person and Dignity of Human Being with respect to Biomedicine
Article 27 of the Constitution guarantees right of a person and dignity of a human being with regard to
the application of biology and medicine. The same article prescribes two prohibitions aimed at
intervention concerning cloning and performance of medical and other experiments without their
permission.
Physical and Mental Integrity
Article 28 of the Constitution gives the legal framework for comprehensive protection of physical and
mental integrity of a person. To wit, it guarantees the dignity and security of a person as well as the
inviolability of physical and mental integrity of a person, its privacy and personal rights. In addition, no
one can be kept in slavery or servile position. In this context, the prohibition of forced labour
prescribed in article 63 is also important although it is included in economic rights or in the group of
rights concerning rights to work under the constitutional concept.
The prohibition of torture or inhuman or degrading treatment is prescribed in article 28 of the
Constitution. Criminal Code of Montenegro (“Official Gazette of MN”, Nos. 70/03 and 13/04) defines,
as criminal acts, in accordance with the European documents from this area, abuse and actions that
insult human dignity, cause great sufferings for the purpose of obtaining information, recognitions,
concerning frightening and making pressure. Also, the Law on execution of penalties (“Official Gazette
of RMN”, Nos. 25/94, 29/94 and 69/03) prihibits and defines the manner of punishing the acts of
torture, abuse, humiliation, carrying out the medical and scientific experiments, determines the right to
compensation of damage to a person being a victim of such actions, prohibits bringing in inferior
position persons sent to serve a sentence.




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1.2.1.2. Freedom and Security of Persons
Personal Freedom and Deprivation of Freedom
Article 29 of the Constitution guarantees right to personal freedom to everyone, and deprivation of
freedom is allowed only due to and in the procedure prescribed by the law. A person deprived of
freedom must be immediately notified in its own language or in the language he/she understands on
the reasons of freedom deprivation. Simultaneously, a person deprived of freedom must be informed
that he/she is not obliged to give any statement. At the request of the person deprived of his/her
liberty, the authority immediately informs about the deprivation of liberty the person of own choosing of
the person deprived of his/her liberty. The person deprived of his/her liberty has the right to the
defence attorney of his/her own choosing present at his interrogation. Unlawful deprivation of liberty is
punishable.
Detention
The constitutional basis for the detention is contained in article 30, which prescribes that a person
suspected with reasonable doubt to have committed a criminal act may, on the basis of the decision of
the competent court, be detained and kept in confinement only if this is necessary for carrying out the
criminal proceedings. Detainee is given the detailed decision of detention at the time of being placed
in detention or at the latest 24 hours from being put in detention. Detainee has the right to appeal
against the decision of detention, upon which the court decides within 48 hours. The duration of
detention must be reduced to the shortest possible period of time. The detention by the decision of
first-instance court may last up to three months from the day of the detention, and by the decision of a
higher court, the detention may be extended for additional three months. If no indictment is raised by
that time, the detainee will be released. The detention of minors may not exceed 60 days.
Respect for Person in Criminal or Other Proceedings
Article 31 of the Constitution guarantees the respect of human personality and dignity in criminal or
other proceedings, in case of deprivation or limitation of freedom and during serving of a sentence.
Any form of violence, inhuman or humiliating behaviour against a person deprived of freedom or
whose freedom has been limited, as well as extortion of confession or statement is prohibited and
punishable.
Freedom of Movement and Residence
Article 39 of the Constitution guarantees the right to freedom of movement, residence and the right to
leave Montenegro. These freedoms may be limited only if it is required for carrying out the criminal
proceedings, prevention of contagious diseases or for the security of Montenegro.
Right to Asylum
The constitutional basis contained in article 44 prescribes that a foreign person reasonably fearing
from persecution on the grounds of his/her race, language, religion or association with a nation or a
group or due to own political beliefs may request asylum in Montenegro. This article also prescribes
the prohibition of expelling foreign persons from Montenegro to where due to his race, religion,
language or association with a nation he/she is threatened with death sentence, torture, inhuman
degradation, persecution or serious violation of rights guaranteed by this Constitution. Paragraph 3 of
the same article prescribes that a foreign person may be expelled from Montenegro only based on the
decision of the competent authority and in the legally prescribed procedure.
The Law on Asylum was adopted on July 10, 2006 (“Official Gazette of RMN”, No. 45/06) and is
harmonised with the international standards and was positively evaluated by the international
community. A detail review is given in the Chapter 3.24.4.




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                                     Government of Montenegro




1.2.1.3. Legislative Integrity of Person
Fair and Public Trial
The Constitutional basis is contained in article 32, which defines that everyone has the right to fair and
public trial in reasonable timeframe before the independent, impartial and legally established court.
Principle of Legality and Lenient Law
The Constitutional basis for the protection of principles of legality and application of lenient law is
contained in articles 33 and 34, which prescribe that no one can be punished for an act that, prior to
being committed, was not stipulated by the law as punishable, nor may be pronounced a punishment
which was not envisaged for that act, and that criminal and other punishable acts are stipulated and
the punishments for them are pronounced in accordance with the law in force at the time when the act
was committed, unless the new law is more favourable for the perpetrator.
Presumption of Innocence and ne bis in idem
The presumption of innocence is defined in article 35 of the Constitution, which prescribes that
everyone is deemed innocent until the guilt thereof has been established by an enforceable court
decision, as well as that the accused is not obliged to prove the innocence thereof. The same article
prescribes the obligation of a court to interpret the doubt regarding the guilt to the benefit of the
accused.
The observance of the principle of ne bis in idem, which represents non-derogatory human right
according to the European Convention for Human Rights, is guaranteed by article 36 of the
Constitution that prescribes that no one may be trialled or convicted twice for one and the same
punishable act.
Right to Defence and Compensation of Damage for Illegal Action
The Constitutional basis of the right to defence is contained in article 37, which defines that everyone
is guaranteed the right to defence, and especially: to be informed in the language he/she understands
about the charges against thereof; to have sufficient time to prepare defence and to be defended
personally or through a defence attorney of his/her own choosing.
Compensation of damage due to the illegal action is defined in article 38, which prescribes that person
deprived of freedom in an illegal or ungrounded manner or convicted without grounds has the right to
the compensation of damage from the state.
Legal Remedy and Legal Aid
The Constitutional basis with respect to the right to legal remedy is contained in article 20, which
defines that everyone has the right to legal remedy against the decision ruling on the right or legally
based interest thereof.
Legal aid is defined in article 21, which prescribes that everyone has the right to legal aid, which is
provided by the bar, as an independent and autonomous profession, and by other services. Pursuant
to the law, legal aid may be provided free of charge.

1.2.1.4. Personal Integrity and Moral Personality Integrity
Right to respect for private life – privacy
Constitutional ground is contained in the Article 40 whereby is determined that everyone has the right
to respect for his private and family life.
Inviolability of home
Constitution has prescribed that the home is inviolable and that no one can enter home or other
premises against the will of its holder and perform search therewith without the court order.
It has been prescribed that the search is performed in the presence of two witnesses.

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Person having official capacity may enter home or other premises even without the court order and
perform the search without the presence of witnesses if so necessary to prevent the execution of a
criminal act, for immediate apprehension of a perpetrator or to salvage people and property
Confidentiality of correspondence and of personal data
Constitutional ground for the confidentiality of correspondence is contained in the Article 42 whereby is
determined that confidentiality of letters, telephone conversations and other means of communication
is inviolable.
The principle of inviolability of letters, telephone conversations and other means of communication
may be deferred from only based on a court order if necessary for conducting of the criminal
proceeding or in interest of security of Montenegro.
Protection of personal data is guaranteed by the Article 43 whereby the use of personal data is
prohibited other than the purpose they are intended for.

1.2.1.5. Political and Spiritual Personality Integrity
Right to elections
Constitutional ground of this right is presented in the Article 45 whereby the right to vote and to be
elected lays with the citizen of Montenegro having 18 years of age and having at least two year of
habitual residence in Montenegro is prescribed. Constitution prescribes the electoral right as a general
and equal, and is exercised in elections. Elections area free and direct and the vote are secret.
Freedom of assembly and association
Article 52 of the Constitution guarantees freedom of peaceful assembly, without approval, with prior
notification of the competent body. This freedom may be restricted temporarily by a decision of a
competent body for the prevention of disorder or crime, for the protection of health or morals or for the
protection of the safety of people and property in accordance with the Law.
Article 53 of the Constitution guarantees freedom of political, union and other association and action,
without approval, by registering with the competent body. Prohibition of forced membership of an
association is also regulated by the same Article. Paragraph 3 prescribes that the state assists political
and other association in cases there is a public interest for doing so.
Prohibition of organizing, operation and establishment
Constitutional ground for the political organizing within state bodies is contained in the Article 54 which
prohibits political party membership for judges of the Constitutional Court, judges, State prosecutor
and deputies thereof, Ombudsman for human rights and freedoms, member of the Council of the
Central Bank, member of the State Audit Institution Senate, professional members of Army, Police and
other security service. Political organizing and action is also forbidden to foreign national and political
organizations having head office outside of Montenegro.
Article 55 prohibits operation of political and other organizations directed towards forceful change of
the constitutional system, infringement of the territorial integrity of Montenegro, violation of guaranteed
rights and freedoms or instigation of national, racial, religious and other hatred as well as
establishment of secrete subversive organization and irregular armies.
Right to address international organizations
Article 56 of the Constitution prescribes that everyone has right to address international organization
to protect personal rights and freedoms guaranteed by the Constitution.
Right to recourse to state body
Article 57 of the Constitution guarantees that everyone has the right to recourse to state body or
organization exercising public authorities, individually or collectively with others, and to receive
answer. No one may be held liable, nor suffer other adverse consequences as a result of views
presented in the recourse, unless has committed a crime thereby.

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                                      Government of Montenegro


Freedom of thought, conscience and religion
Article 46 of the Constitution guarantees the freedom of thought, conscience and religion to everyone
as well as right to change religion or belief. Furthermore, the same Article guarantees freedom for
everyone, either alone or in community with others and in public or private, to manifest religion or
belief in prayer, sermons, customs or rituals. No one is obliged to declare own religious and other
beliefs.
Freedom to manifest religion beliefs may be restricted only if it is necessary for the protection of the
life and health of people, public peace and order or other rights guaranteed by the Constitution.
Montenegro is defined as secular state where the religious communities are separated from the state.
Constitution guarantees equality and freedom in performing religious rituals and religious affairs to
religious communities operating on the territory of Montenegro (Article 14).
State aid for religious communities is realized through the participation for contributions for pension,
social and healthcare insurance of clergymen (50% of these costs), and mainly in investment in sacral
facilities especially in the protection of those facilities having character of the cultural monuments.
State also provides financial support for spiritual events and cultural activities of religious communities.
State does not get involved in the internal organization and organization of religious affairs, but has left
it within the competences and responsibilities of very religious communities i.e. religious communities
are independently regulating own organization and affairs.
Law on the Legal Status of Religious Communities (adopted in 1977, changed and amended in 2003)
and the Law on Celebration of Religious Holidays (adopted in 1993, changed and amended in 1994)
regulate exercising of religious rights.
Conscientious objection
Constitutional ground for this right is set in the Article 48 of the Constitution, whereby is prescribed that
everyone has right of conscientious objection and that no one is obliged to exercise military or other
obligation involving the use of weapons, against own religion or beliefs.
Freedom of expression
Constitutional ground for the right to freedom of expression by speech, writing, picture or another
manner is contained in the Article 47. This right may be restricted only by a right of other person to
dignity, reputation and honor and if it threatens public morals or security of Montenegro.
Freedom of the press and censorship prohibition
Article 49 of the Constitution guarantees freedom of the press and other forms of information of the
public, as well as the right to establish without the approval newspapers and other public information
outlets, by registering with the competent body. This Article also protects the right to response and
the right to correction of any untrue, incomplete or incorrectly conveyed information, therewith ones
right or interest is violated and the right to compensation of damage caused by the publication of
incorrect data or information.
Pursuant to the Article 50 of the Constitution, there is no censorship in Montenegro. Competent court
may prevent the dissemination of information or idea via the public information outlets only if it is
necessary to prevent invitation to forceful change of system set by the Constitution, protection of the
territorial integrity of Montenegro, prevention war propagation or instigation of violence or performance
of crimes, prevention of racial, national or religious hatred or discrimination propagation.
Law on Media prescribes that media in Montenegro are free and that Montenegro provides and
guarantees freedom of information at the level of standards contained in international documents on
human rights and freedoms, as well as that this Law should be applied in accordance with principles of
the European Convention for the Protection of Human Rights and Fundamental Freedoms using
practice case law of the European Court of Human Rights (Article 1).
Montenegro guarantees rights to free establishment and undisturbed operation of media, in
accordance with the Article 2 of the Law on Media, based on the: freedom of opinion; freedom of

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expression, collection dissemination, publication and obtaining information; free access to all sources
of information; protection of the human personality and dignity and free flow of information.
Montenegro guarantees equal participation in information of national and foreign legal and physical
persons, in accordance with this Law and the Law on Broadcasting. Article 3 of the Law prescribes
that the state provides part of financial resources for the realization of rights of citizens on information
without discrimination guaranteed by the Constitution and the law, and the Article 5 prescribes that the
monopoly in information is not allowed.
Access to information
Article 51 of the Constitution guarantees right to access information held by the state bodies and
organization exercising public authorities. This right may be restricted if in the interest of protection of
life, public health, moral and privacy, criminal proceeding, security and defense of Montenegro,
foreign, monetary and economic policy.
Law on Free Access to Information (Official Gazette, number 68/05) regulates the manner and the
procedure for exercising rights of citizens to request, obtain and use information owned by the
authorities. Access to Information owned by the authorities is free and domestic and foreign physical
and legal person have the right to access information without discrimination. This Law guarantees the
right to access information at the level of principles and standards contained in international
documents on human rights and freedoms. The Law is based on the principles: freedom of
information, equality in exercising rights, openness and publicity of operation of public administration
bodies and the emergency of procedure. Article 3 of the Law prescribes that the publication of
information owned by authorities represents a public interest. Decree on Compensation of costs in the
access to information procedure (effective from the 8th November 2007) and the Guide for Access to
Information published on the web-site of the Government: www.vlada.cg.yu.
Limitation of human rights and freedoms
Constitution guarantees that everything that is not prohibited by the Constitution and the law is free in
Montenegro. Restriction of human rights and freedoms are contained in the Article 24 that defines
that guaranteed human rights and freedoms may be limited only by a law within a scope allowed by
the Constitution in a measure necessary to meet the purpose of the allowed restriction in an open and
free society.
Possibilities for temporary restrictions of human rights are contained in the Article 25 of the
Constitution which stipulates that realization of some human rights and freedoms my be limited during
the declared state of war or emergency state, but only within the necessary scope. Restriction cannot
be imposed under any of discriminatory grounds: sex, nationality, race, religion, language, ethical or
social origin, political or other belief, financial position or any other personal feature.
Non-derogative rights are to: life, legal remedy and legal aid; dignity and respect of a person; fair and
public trail and the principle of legality; presumption of innocence; defense; compensation of damage
for illegal or ungrounded deprivation of freedom and ungrounded conviction; freedom of thought,
conscience and religion; entry into marriage.
There cannot be abolishment or prohibition of: inflicting or encouraging hatred or intolerance;
discrimination; trial and conviction twice for one and the same criminal offence (ne bis in idem); forced
assimilation.
Measures of temporary restriction may be in effect at the most for the duration of the state of war or
emergency state.
Institutional framework
In accordance with the above stated constitutional and legal framework, following institutions are in
charge for the realization of stated rights: Ministry for Protection of Human and Minority Rights,
Ministry of Health, Labor and Social Welfare, Ministry of Interior Affairs and Public Administration,
Ministry of Justice, Committee for human rights and freedoms of the Parliament of Montenegro,
Ombudsman of human rights and freedoms, Office for the Gender Equality, Office for the Cooperation


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                                      Government of Montenegro


with Non-governmental Organizations of the Government of Montenegro, Institute for Care of
Refugees.
Short-term priorities
     Law on protection of personal data will be adopted in 2008, whereby as part of protection of
     human rights and fundamental freedoms conditions and manner for the special protection of right
     to privacy will be prescribed in accordance with principles and standards contained in international
     documents;
     Law on Media Concentration of Printed Media will be adopted in 2008, which will regulate manner
     of establishment of media concentration fro printed media and measures for its prevention and
     removal;
     Law on Confidentiality of Data will be adopted, that will prescribe degree and time for the
     confidentiality of data, criteria for establishment of confidential data, competency of bodies and
     legal entities in the application of the Law, as well as protection measures and manner of
     proceeding with confidential data in accordance with international standards and comparative legal
     experience, issue of confidentiality of information should be limited to necessary and needed
     content measure (law adopted in the first quarter of 2008, "Off. Gazette of Montenegro" No.
     14/08);
     Government activities will be directed toward the legislative regulations for eliminating torture by
     adopting new and amending existing laws aimed for the full harmonization with international
     standards.
Mid-term priorities
     Based on the analyses of the current legislative framework of legal assistance with the proposal of
     the model for provision of free legal assistance, the Government will review the current legislative
     framework regulating legal assistance, make a brief on experiences related to authorities which
     have provided legal assistance to citizens to-date, review the comparative experiences and
     determine the proposal model for provision of free legal assistance, and commence the drafting of
     a special law on legal assistance in accordance with the regulations of the European Union and
     recommendations of the European Council in this area.
     The Law on Amendments to the Law on Public Broadcasting Services of Radio of Montenegro and
     Television of Montenegro will be adopted, which will, due to the experience in application of the
     current law, in complete and qualitative manner regulate the issues of significance for work of
     national public services of Radio and Television of Montenegro, in accordance with the standards
     of the European Council and the European Union, for the purpose of promoting and improving
     freedoms of information.
     The Law on Amendments to the Law on Broadcasting will be adopted, which will, due to the
     experience in application of the current law, in complete and qualitative manner regulate the issues
     of significance for functioning of the broadcasting systems, in accordance with the standards of the
     European Council and the European Union.
     Strengthening of capacities and mechanisms for implementation of relevant legislation.
Relation with Non Government Organisations
Legislative framework
The Law on Non Government Organisations (“Official Gazette of MN”, No. 11/07) regulates the issue
of procedure, registration, conditions and forms of associations of citizens in Montenegro. The non-
government organisation includes non-government associations and non-government foundations.
Non-government association is defined as “non-profit organisation with members, founded by
domestic and foreign natural persons and legal entities, in order to realize individual or common
interests or for realization and affirmation of public interest”. Non-governmental foundation is defined
as ”a non profit organization without members, founded by domestic and foreign natural persons and
legal entities, for pooling resources and assets in order to realize charitable and other activity, which
are of public interest and importance”.


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Pursuant to the provisions of the Law, non-government organisations are not political organizations,
religious communities, trade union organizations, sport organizations, business associations, or
organizations and foundations whose founder is the State.
Amendments to the Law on Non Government Organisations from 2007 prescribe the conditions under
which NGOs can perform their business activities.
Specific issues with respect to the NGOs activities are governed by other regulations such as: the Law
on Corporate Profit Tax (“Official Gazette of RMN”, No. 80/04) that defines non-taxable income of non
government organisations; the Law on Administrative Fees (“Official Gazette of RMN”, No. 80/04),
which exempts non government organisations from taxes and fees for determining objectives for
which they have been founded; the Law on Value Added Tax (“Official Gazette of RMN”, No. 80/04),
which exempts from taxes NGO under the specific conditions; the Law on Turnover of Immovable
Property Tax (“Official Gazette of RMN”, No. 80/04), which prescribes that this tax is not paid by
NGOs for immovable properties that they use for performing program activities for which they have
been founded; the Law on State Administration (“Official Gazette of RMN”, No. 38/03), and the Law on
Local Self-Government (“Official Gazette of RMN”, No. 13/06) that regulate the relations of the bodies
of the state administration, local self-government and non government organisations, and these two
laws also prescribe the obligation of appropriate consulting of non-government organisations in the
procedure and adoption of the laws, secondary legislation acts and other regulations and acts, as well
as development projects and programs; the Law on Chance Games (“Official Gazette of RMN”, No.
52/04) that regulates that the part of the profit from chance games will be used for funding non
government and other organisations projects. The Government has drafted the proposal of the Law on
amendments to the Law on chance games, which prescribes that at least 75% of the income from
chance games is anticipated for non government and other organisations to finance plans and
programs of non government organisations.
The participation of NGOs in working and other bodies of the competent institutions is defined by
individual laws, such as the Law on Broadcasting (“Official Gazette of RMN”, No. 77/06) that
envisaged that NGO and citizens’ associations from the media and those included in the protection of
human rights and freedom are authorised entities for appointing members of the Broadcasting Agency
Council. The Law on Public Broadcasting Services "Radio of Montenegro" and “Television of
Montenegro" (“Official Gazette of RMN”, No. 62/02) also anticipated that the non government
organisations from the field of protection of human rights, sport, tourism and ecology, children’s rights,
the youth and family, education, health care and social welfare and those involved in promotion of
rights of members of national and ethnical groups are authorised entities for appointing the members
of RTCG Council. The Law on Health Protection (“Official Gazette of RMN”, No. 39/04) anticipated
that representatives of the non government organisations which basic goal is the protection of
handicapped, disabled and sick persons may be appointed in the board of directors of the health
institutions founded by the Republic. The Law on Police (“Official Gazette of RMN”, No. 28/05)
regulated that the civil control of the police work is performed by the Council consisting of five
members, of which one member is appointed by non-government organisations involved in human
rights.
NGOs prepared or participated in the preparation of several laws or strategic documents, such as: the
Law on Public Procurement, the Law on Agency for National Security, the Law on Free Access to
Information, the Law on Police, the Law on Conflict of Interest, the Law on Witness Protection, the
Law on Safety in Traffic; the Defence Strategy, Program for fight against corruption and organised
crime, Strategy for development and reduction of poverty, Strategy for social and child protection,
Strategy for the protection of elder persons in Montenegro, the Strategy for inclusion of disabled
persons and the like, and participate in teams monitoring the implementation of the strategic
documents.
Approximately 4,200 NGOs were registered in Montenegro (with the increasing trend, and this number
is changed on daily basis). The Ministry of Interior Affairs and Public Administration performs the
registration and keeps the register of NGOs.



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                                     Government of Montenegro


The financing of NGOs by the state is performed in accordance with the Law on Non Government
Organisations and the Law on Chance Game through public invitations, and the decisions are adopted
by the Committee of the Parliament of Montenegro and the Committee of the Government of
Montenegro, established pursuant to these laws.
Pursuant to the prevailing regulations governing various aspects of the relation of the Government and
NGOs, and for the purpose of further democratisation, promotion and protection of human rights and
basic freedoms, as well as bearing in mind the principle of pluralism and freedom of association, the
Government of Montenegro adopted on May 18, 2008 the document titled “Basics of the Cooperation
of the Government of Montenegro with Non-governmental Organisations”. This document determined
the following objectives: development of democratic, open society and mutual cooperation in
development of European integration processes; development of mutual cooperation, protection of
independence and promotion of transparency and importance of the role of NGOs; creation of
partnership relations of NGOs and state institutions; accomplishment and further promotion of
completeness and interaction for the purpose of more efficient social development; creation of various
institutional mechanisms for promotion and further development of cooperation and mutual
communication; improvement of working conditions of non government organizations, and the
principles of cooperation: partnership, transparency, responsibility, mutual information and
independence of non government organizations.
The discussion on this document preceded its adoption and it was attended by the representatives of
a number of NGOs and international organizations working in Montenegro.
Institutional framework
At the beginning of 2007 the Government founded the Office for Cooperation with Non-governmental
Organizations, which functions as an internal organizational unit of the General Secretariat of the
Government. The Rules on Internal Organization and Systematization determine the scope of work of
the Office, which inter alia, performs operations related to preparation of plans, programs, projects and
other activities in accordance with principles and goals defined in the base document »Cooperation
Bases«, and other documents, developing mutual cooperation, not affecting the independence of
NGO and improving transparency of its own work and NGO work, and all for the purpose of building
an open and democratic society and mutual cooperation in the development of European integration
processes.
There are two systematized and filled work places. Contact persons are appointed in the ministries
and other state authorities for cooperation with NGO (43 persons), for which NGO project CDNGO
(Centre for Development of Nongovernmental Organizations) »Building of civil servant capacities for
cooperation with NGO« is designed and implemented with the following goals: a) education of contact
persons for cooperation with NGO, b) increase of the level of cooperation and communication
between nongovernmental organizations and the Government of MNE in the area of realization of
principles and obligations of the Government of MNE from the document Cooperation Bases of the
Government of Montenegro and NGO, c) liaison between the civil servants assigned to cooperate with
NGO; the project is to be realized as a joint activity of CDNGO and the Office.
Short-term priorities
     Adoption of the Strategy for Cooperation between the Government and NGO no later than the end
     of the second quarter of 2008,
     Adoption of the Action Plan for Implementation of the Strategy, no later than the end of the third
     quarter of 2008,
     Employment of one person with university qualification in the Office for Cooperation with NGO, for
     the period of one year, engagement of volunteers, for the purpose of strengthening of the Office
     and creation of possibilities for qualitative work, during February 2008.
Mid-term priorities




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   Implementation of the strategic document on cooperation of the Government and non-
   governmental organizations, particularly with regard to initiation of amendments of the current or
   adoption of new legislation.

1.2.2. ECONOMIC AND SOCIAL RIGHTS
Legislative framework
Ownership rights
Article 58 of the Constitution guarantees ownership rights. No one may be deprived or restricted with
regard to ownership rights, except when otherwise required by public interest, with a fair
compensation. Natural resources and goods in general use are under state ownership.
Montenegro enforces the restitution process in accordance with the European Convention on Human
Rights. The Law on Restitution of the Taken Away Property Rights and Compensation (Official
Gazette of RMNE No. 21/2004) has been applied and applications of former owners entitled to
compensation are in the process of consideration. The proceedings take place before competent
municipal commissions and their outcomes are physical return, if possible, or compensation due to
which the Compensation Fund has been established. The Parliament adopted the Law on
Amendments of this Law (Official Gazette of RMNE No. 49/07).
The Law on Contracts, the Law on Ownership-Legal Relations and the Law on State-owned Property
will be adopted.
Entrepreneurship freedom
The Constitutional ground lies in Article 59, which guarantees the freedom of entrepreneurship, which
may be restricted only if required for protection of health of people, environment, natural resources,
cultural heritage and safety and defence of Montenegro.
Inheritance rights and rights of foreign nationals
The Constitution in Article 60 guarantees the inheritance right, and in Article 61 it prescribes that a
foreign person may be the holder of property right in accordance with law.
Right to work and employment rights
Right to work
The Constitution, in Article 62, guarantees the right to work, as well as the right to free choice of
occupation and employment, to fair and humane work conditions and protection during the period of
unemployment.
The goal of the policy of Montenegro is to ensure opportunities for each individual to provide means of
living through work he/she chooses and accepts by free will. Taking into consideration the basic goals
of the European Social Charter, Montenegro has accepted to ensure high and stable level of
employment for the purpose of achieving total employment as one of its primary tasks and duties. The
Law on Employment (Official Gazette of RMNE 5/02 and 79/04) regulates employment, insurance in
case of unemployment, rights of unemployed persons and conditions and procedure for their
realization, the manner of providing funds and other issues relevant for organized and productive
employment.
Prohibition of forced labour
Forced labour is prohibited by Article 63 of the Constitution, and the same provision defines that the
following is not considered to be forced labour: usual work during the period of imprisonment penalty
and military service or service substituting it, work required in case of crises or disasters threatening
human lives or property.
Rights of employees




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                                     Government of Montenegro


Article 64 of the Constitution guarantees individuals the rights arising from employment, and these are
rights to: earnings, restricted work hours, paid vacation and protection at work. The youth, women and
disabled persons are subject to special protection at work.
The right to strike is guaranteed to employees by Article 66 of the Constitution. This right may be
restricted for employees with the Army, police, state authorities and public service, for the purpose of
public interest protection, in accordance with law.
The rights and obligations of employees in respect of labour are regulated by the Labour Law (Official
Gazette of RMNE No. 16/07), the Law on Protection at Work (Official Gazette of RMNE No. 79/2004),
Collective Agreements (general, branch and at the level of employers) which provisions are partly
harmonized with the European Social Charter and conventions of International Labour Organization.
Social position of employees and social insurance
Social position of employees is agreed upon in the Social Council, which is constituted by the
representatives of the Trade Union, employers and the Government (Article 65 of the Constitution).
The Constitution, in Article 67, prescribes that social insurance of employees is mandatory, and also
that the State is to ensure financial security for persons incapable to work and without any means of
living.
The rights from social and children’s protection and performance of activities related to social and
children’s protection are regulated by the Law on Social and Children’s Protection (Official Gazette of
RMNE No. 78/05).
Bilateral international agreements based on reciprocity provide for rights from social insurance,
including rights from health insurance, rights from pension insurance, rights in case of unemployment,
rights to children allowances and administrative legal assistance of citizens from countries which are
contracting parties in respect of labour and rights to stay in one of the countries which are contracting
parties.
Protection of persons with disability
The Constitution in Article 68 guarantees special protection of persons with disability.
The protection of persons with disability is regulated by: the Law on Social and Children’s’ Protection
(Official Gazette of RMNE No. 78/05), the Law on Privileges for Persons with Disability in Internal
Passenger Transport, (Official Gazette of RMNE No. 47/99), Law on Protection of War Veterans and
Disabled Persons (Official Gazette of RMNE no. 69/03) and, the Law on Pension and Disability
Insurance (Official Gazette of RMNE No. 54/03, 61/04, 79/04, 81/04, 29/05 and 17/07). The Strategy
for Integration of Persons with Disability was adopted for the purpose of improving the position of
persons with disability and their integration in social flows.
Health protection
The Constitutional ground lies in Article 69, which prescribes that everyone has the right to health
protection. The categories of sensitive groups – children, pregnant women, elderly persons and
persons with disability have the right to health protection from public revenues, unless such a right is
exercised on some other ground.
The Law on Health Insurance (Official Gazette of RMNE No. 39/2004) ensures the realization of
health protection and other rights to citizens, in accordance with this Law. Health protection, as a set
of measures and activities for health preservation, protection and improvement, prevention and
suppression of diseases and injuries, early diagnose of illnesses, timely treatment and rehabilitation
are in details regulated by the Law on Health Protection (Official Gazette of RMNE No. 39/2004).
Consumer protection
The Constitutional framework is given in Article 70, which prescribes the protection of consumers.
Actions that harm the health, safety and privacy of consumers are prohibited.



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The Law on Consumer Protection (Official Gazette No. 26/2007) in details regulates the rights of
consumers.




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                                      Government of Montenegro



Marriage and family
Constitution in Article 71 prescribes that marriage may be entered into only on the basis of a free
consent of a woman and a man, as well as that the marriage is based on equality of spouses.
The guarantee that family enjoys special protection is contained in Article 72 of the Constitution. This
provision also prescribes the obligation of parents to take care of children, to bring them up and
educate them, as well as the obligation of children to take care of their parents in need of assistance.
Children born out-of-wedlock have the same rights and obligations as children born in wedlock.
Protection of mother and child
Article 73 of the Constitution guarantees that mother and child enjoy special protection. The State
creates the conditions that encourage childbirth.
Article 74 of the Constitution guarantees that a child enjoys rights and freedoms appropriate to his/her
age and maturity. Also, a child is guaranteed special protection from psychological, physical,
economic and any other exploitation or abuse.
The Law on Social and Children’s Protection (Official Gazette of RMNE No. 78/05) prescribes that the
following are subject to special protection: children without parental care; children with physical,
mental and sensual disabilities; abused and neglected children; children with behavioural disorders.
Also, the right is envisaged for pregnant women to family material support, and the right for pregnant
women and single parents with a child who is to three years old to accommodation in another family.
The Law prescribes rights arising from children’s protection: equipment for a newborn child; children
allowances; child-birth compensation; compensation for salary with half working hours, vacation and
recreation of children.
Family Law (Official Gazette of RMNE No. 1/07) establishes the rights of children with regard to family
relations. The Law prescribes rights in the areas of adoption, custody, family and institutional
accommodation, performance of parental right and other.
For the purpose of improvement of rights of children in Montenegro, the National Action Plan for
Children 2004 – 2010 was adopted, which defines the policy with regard to protection of children. The
Plan is based on internationally accepted standards for protection of children determined in the
Convention on Children’s Rights, which prohibit discrimination, ensuring the best interests of children.
Institutional background
Ministry of Health, Labour and Social Care in accordance with legal regulations and Employment
Bureau with branch units are in charge for the employment policy and achievement of the right on
labour.
Ministry of Health, Labour and Social Care in accordance with legal regulations is partly in charge for
the social protection of persons with disabilities policy. Direct protection is provided by public
institutions: 10 centers for social care, Public Institution for Adult Residence – disabled and old
persons – Public Institution, the Adult Home »Grabovac«, Public Institution for residence of persons
with special needs: slight, average, difficult and severe mental disturbance – Public Institution
»Komanski most«.
Ministry of Health, Labour and Social Care is in charge for the protecion of users of millitant and
invalid protection policy and for the second instance administration procedure as well. Local self-
government body is in charge for solving the complaints in the first instance administrative procedure,
and these are performed as transmitted tasks in the interest of the local population.
The pension and invalid insurance policy is in charge of the Ministry of Health, Labour and Social Care
in cooperation with the Fond of Pension and Invalid Insurance which is monitored by the Ministry.
The protection of mother and child and the rights of a child policy is in charge of the Ministry of Health,
Labour and Social Care.



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Public Institutions, centers for social work provide the implementation of adequate forms of social and
child protection and provide services of social and child protection. In Montenegro there are 10 Public
Institutions, centers for social work that work with their services on the territory of 21 municipality.
The Institution for the Child Protection without parental care, Child's Home »Mladost« Bijela deals with
the protection of children without parental care.
Short-term priorities
   By 2008, the National Strategy of Employment and Development of Human Resources shall be
   adopted for the period 2008-2011
   Labour Law and the Law on Social Councelling shall be passed
   Law on Moving of Blind Persons with the help of dog-guide, Law on Protection of Disabled
   Persons from Discrimination shall be passed
   Amendment of by-laws, aimed at compliance with above mentioned regulations.
Mid-term priorities
   The Law on Amendments of Employment Law, Law on Working Qualification and Employement of
   Disabled      Persons,       Law     on     Employment        and      Work   of    Foreigners
   shall be passed;
   The Labour Fond shall be established in accordance with the Employment Law, which main goal is
   the creation of conditions for employment of persons for whose work the need has ceased due to
   technological, economic and organisational changes.
   Strengthening of capacities for implementation of relevant provisions.

1.2.3. CULTURAL RIGHTS AND MINORITY PROTECTION
Legislative framework

1.2.3.1. Cultural rights
Cultural rights are defined under the Constitution, i.e. under its Chapter IV- Economic, Social and
Cultural Rights and Freedoms. The positive legislation of Montenegro, which governs the economic,
social and cultural rights and freedoms, is compatible with the relevant ratified international legislation
- starting from the UN Charter and going to the Economic, Social and Cultural Rights Pact - as well as
with the stated standards by the Council of Europe.
As for the protection and valorization of the cultural heritage, the Law on the Historical Monument
Protection (1991); the Law on the Museum Activities (1977, 1989); the Law on the Librarian Activities
(1977, 1989); the Law on the Archival Activities (1991, 1994); the Law on the Reconstruction and
Refurbishment of the Towns Destructed During the Disastrous Earthquake on April 15, 1979 (1984,
1986); the Law on the Reconstruction of the Monumental Stock of Kotor (1991); and the Law on
Monuments, Memorials, Historical Events and Distinguished Figures (1971, 1972, 1988) are in force.
As for the cultural inventiveness: the Law on the Theatrical Activities (2001); the Law on Publishing
(1995); the Law on Cinematography (1993); and the Law on Independent Artists (1984, 1985) are in
force.
In addition to the listed pieces of legislation, relevant to the culture are also the Law on Copyrights and
Related Rights (Federal law as of 1998); the Law on the State Awards (1996); General Collective
Agreement (1995); and Individual Collective Agreement for the Cultural Activities (1995).
Right to schooling - education
The constitutional grounds therefore are under Article 75, which guarantee the education under equal
conditions. The primary schooling is compulsory and free-of-charge. The autonomy of the university,
faculty and scientific schools shall be guaranteed as well.




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                                       Government of Montenegro



Freedom of innovativeness
Article 76 under the Constitution guarantees the freedom of scientific cultural and artistic
innovativeness. Besides, the same provision guarantees the freedom of scientific and artistic and
scientific discovery related activities, as well as the moral and property right to their performers.
Science, culture and art
Article 77 under the Constitution prescribes an obligation to be undertaken by the State to encourage
and support the development of education, science and art, as well as of sport, physical and technical
education, and to propagate scientific, cultural, artistic and historical values.
Protection of nature and cultural heritage
The Constitutional protection is guaranteed under Article 78 that prescribes an obligation of each
individual to preserve natural and cultural heritage of public interest, as well as an obligation to be
undertaken by the State to protect them.
Institutional framework
As for the application of the cultural rights related provisions, the Ministry of Culture, Sport and Media,
the Ministry for the Protection of Human and Minority Rights, the Ministry of Education and Science
and the University of Montenegro are the relevant institutions.
Short term priorities
     The Law on Culture to be adopted, defining the principles of exercising and developing culture,
     public interest in culture, the obligation to adopt a National Program for the Development of Culture
     as a strategic development document, the manner of establishing and working of cultural
     institutions, the position of artists and their professional associations, support and assistance to the
     development of culture through the co-financing of projects and providing funds for financing
     culture from the budget of Montenegro, that is, the basic budgetary revenues, and from the
     dedicated revenues for certain areas of culture. This Law will enable the establishment of cultural
     institutions by domestic and foreign legal and physical entities, under the same terms. In addition
     to that, all authors and artists which have permanent residence in Montenegro as well as all legal
     entities registered in Montenegro and working in the field of culture will receive financial assistance
     under the same terms.
     The Law on Publishing to be adopted.
Mid-term priorities
     The Law on Culture to be enforced
     The protection of cultural heritage , along with establishing the balance in relation to the
     contemporary cultural and artistic innovations – more funds to be invested in the protection of
     cultural heritage, in order to make this portion of history a component part of the present time.
     Institutional capacity for the promotion of cultural rights to be strengthened

1.2.3.2. Special – minority rights
Legislative framework
In addition to fundamental human rights and freedoms, while for the purpose of the protection of the
overall national identity, the Constitution and the laws of Montenegro lay down also a set of rules.
The Constitution, in its Part II and Articles 79 and 80, offers guarantees to members of minority
community and other ethnic groups the rights and freedoms hat can be exercised individually or in
conjunction to other rights and freedoms, and it forbids any assimilation of the members of minority
community and other ethic groups . the State shall be under obligation to protect the members of
minority community and of other ethnic groups against all forms of forced assimilation.
The Constitution guarantees the following specific – minority rights: right of expressing, preserving,
developing and public stating any national, ethnic, cultural and religious specificities; of choice, use

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and public exhibition of national symbols, as well as of celebrating national holidays; of the use of their
proper language and script, both for public and official purposes; of education in the language and
script, in public schools, as well as of the inclusion of the historical and cultural fact of the members of
minority community and of other ethnic groups in the official curricula; as well as that the local self-
government, public and judicial authorities, in the environments where the majority population is
presented by members of minority community or of other ethnic groups, shall conduct their respective
procedures also in the languages of those populations< of establishing educational, cultural and
religious associations, with the financial support by the State; to register their first and family names,
as well as to use them, in their respective languages in the official documents; that the traditional local
names, street and settlement designations and topographic marks shall be written also in the
languages of minority community and of other ethnic groups in environments where they are the
majority population; that they are represented proportionally in the Parliament of Montenegro and in
the the councils of local self-government units in the environments where they are the majority
population, while pursuant to the principle of affirmative action; to be proportionally represented in
public services, public administration authorities and local slef-government bodies; to be informed in
their proper languages; to establish and maintain contacts wit citizens and associations of Montenegro
with whom they have shared national and ethnic origin; and to promote their specific rights.
The Law on Minority Rights and Freedoms (Official Gazette of RM, Nos. 31/06, 51/06 and 38/07)
governs the set of minority rights and the mechanisms of their exercisinga and protecting in more
details. the Law refers to thepreservation of the national identity of minority community, i.e. to the
protection against their assimilation and to the opportunity of their effecyjve participation in the public
life. The Law has been adjusted to the:
   Universal Declaration of Human Rights;
   Declaration     on   the     Rights    of     Persons      Belonging to National or Ethnic,
   Religious and Linguistic Minorities;
   European Convention on the Protection of Human Rights and Fundamental Freedoms;
   Framework Convention for the Protection of Minority Rights;
   European Charter for Regional or Minority Languages;
   The Hague, Oslo and Lund Recommendations by the OSCE High Commissioner on National
   Minorities;
   Guidelines for the Participation of Minorities in Electoral Process.
In addition to the laws protecting minorities in other areas of life (education, media informing, culture,
local self-government and alike), Montenegro has accepted also the purposes of international
documents relevant to the area and, primarily, of the European imperative and legal regulations by the
Council of Europe – the Framework Convention for the Protection of Minority Rights and the European
Charter for Regional or Minority Languages. Pursuant to the obligations under SE, the first country
report on the implementation of the mentioned documents have been forwarded to the relevant
addresses by the line Ministry.
For the purpose of the enforcement of the Law on the protection of Minority Rights and Freedoms, the
Ministry for the Protection of Human and minority Rights approved the Rules for the firs election of the
Minority Council and the Instruction prescribing the Single Forms for the Elections of the Minority
Council members (Official Gazette of RM, No. 46/07). The said Rules and Instruction specify the
composition and the number of members to be appointed to the Minority Council; the method of their
convening; the work of the electronic parliament; the method of te Minority Council members electron;
and they give further and clear instructions as regards the very process. The documents have created
the legal preconditions for the election of the first Minority Council. The Ministry is further engaged in
the activities for the establishment of the Council.
Drafting the Strategy of Minority Policy is underway, since it is the most important binding document
pursuant to the Law on the Protection of Minority Rights and Freedoms. The Commission for the
development of the Strategy of has already been formed and the terms of reference has been
completed as well.


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                                     Government of Montenegro



Institutional framework
Several important authorities and institutions deal with the protection and the promotion of minority
rights. First of all, there is the Ministry for the Protection of Human and Minority Rights that pursue
the monitoring and studying, as well as protecting, the minority rights in harmony with the Constitution,
laws and international documents relevant to the issues concerned, while in harmony with the
democratic trends to which Montenegro aspire.
The Parliament of Montenegro has established a standing body, i.e. the Committee for Human Rights
and Freedoms, which is aimed at considering the issues, and particularly the legislative proposals,
referring to the area of human and minority rights.
The Parliament adopted a Resolution on the Establishment of the Minority Fund (Official Gazette,
No. 13/08) for the purpose of supporting the activities of significance for the preservation and
development of national, that is, ethnic characteristics of minority nations and other minority ethnic
groups and their members as regards their respective national, ethnic, cultural, linguistic and religious
identities.
In addition to that, the Protector of Human Rights and Freedoms exists as an independent and
unbiased institution.
Short term priorities
     Strategy of Minority Policy to be approved
     The Law on Discrimination Ban to be enforced
     The Law on the Use of National Symbols to be amended and supplemented
     Amendments and Supplements to the Law on the Protection of Minority Rights and Freedoms to
     be developed
     Center for the Preservation and Development of the Minority Culture to be established
     Minority councils to be established.
Midd-term priorities
     Implementation of the established measures of the affirmative action to be ensured in the area of
     education, culture, informing, political participation;
     Inter-ethnical tolerance and f the activities to integrate minorities to be promoted
     Institutional capacities for the implementation of the regulations governing human and minority
     rights to be strengthened
     Education about human and minority rights, through programmes, projects, seminars, round table,
     publications and similar activities to be arranged.
     Continuing cooperation with NGOs that are active in the area of the protection of minorities, the
     continuation of the promotion of minority integration and good inter-ethnical relations to be
     encouraged.

1.2.3.2.1. Protection of the Roma
Legislative framework
With the aim to improve the overall position of the Roma and their inclusion in the Montenegrin
society, in 2005, the Government adopted the Action Plan for implementation of the project „Decade of
Inclusion of the Roma 2005-2015“. Bearing in mind that the Action Plan treated only the areas of
education, employment, health care, and housing, on November 8, 2007, the Government adopted the
Strategy for Improvement of the Position of the Roma. The Strategy defines the measures and
activities in the forthcoming four-year period from the legal, political, economic, social, town-planning
and municipal, educational, cultural and information dissemination, health care aspects as well as the
protagonists of the activities, the time schedule of implementation, and the financial resources.




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The Government has adopted the Decision to form the Commission for monitoring of the
implementation of the Strategy for Improvement of the Position of RAE population (the Roma, Ashkali,
and Egyptians) in Montenegro 2008-2012 (Official Gazette of Montenegro, No. 02/08).




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                                      Government of Montenegro



Institutional framework
For the implementation of the above documents and enforcement of the protection of the rights of the
Roma, as a specific ethnic minority, and in view of the fact that a large number of this population has
the status of displaced persons, the following institutions are relevant: the Ministry for Protection of
Human and Minority Rights, the Ministry of Health, Labor, and Social Welfare, Ombudsman for
Human Rights and Minorities, Office for Gender Equality, Office for Cooperation with Non-
governmental Organizations, Office for Care of Refugees.
Short-term priorities
     Implementation of the Strategy for Improvement of the Position of the Roma,
     Strengthening of the mechanisms for implementation of the Strategy
Mid-term priorities
     Evaluation of the Strategy
     Education of the Roma population and the rest of the society, for the purpose of inclusion of the
     Roma in the civil society of Montenegro
     Execution of the Action Plan for implementation of the project ”Decade of Inclusion of the Roma
     2005-2015“.
Refugees
The national strategy for permanent solution of the issue of displaced persons and refugees in
Montenegro was adopted on March 1, 2005, with the aim to find an optimal possible solution for
refugees and, at that time, internally displaced persons in Montenegro within the following three years
depending on the economic abilities of Montenegro, bearing in mind the prevailing international
standards and principles.
The decision on the temporary retaining of the status and rights of the displaced and internally
displaced persons in Montenegro (Official Gazette of the Republic of Montenegro No. 46/06) specifies
that the displaced persons from the former Yugoslav Republics, who currently number 8,474 in
Montenegro (Ministry of Internal Affairs and Public Administration database) and internally displaced
persons from Kosovo, who currently number 16,130 in Montenegro (database of the Office for Care of
Refugees) temporarily retain the status and the rights in Montenegro, which they had on June 3, 2006.
The competent ministries are: the Ministry of Interior Affairs and public administrations for resolution of
the status of refugees as well as the Ministry of Health, Labor, and Social Welfare for protection of the
rights of refugees.
The institution for direct implementation of the policy of looking after the refugees and protection of
their rights is the Office for Care of Refugees, which emanated from the reform of the Commissariat
for Displaced Persons of the Government of Montenegro (Decree on Amendments of and
Supplements to the Decree on Organization and Method of Work of the Government Administration,
Official Gazette No. 72/06), and it is its legal successor. This body is most directly engaged in the
problem issues of the displaced persons and, apart from the so-far affairs, in line with the new
competencies given to it further to the Law on Asylum, it is also engaged in the affairs that are related
to looking after the persons seeking asylum, whose status of refugees has been recognized, who have
been granted additional or temporary protection. Looking after them includes assistance in exercising
of the rights to accommodation, education, legal aid, health care, social welfare, freedom of worship,
access to humanitarian and NGOs, humanitarian aid, reunion of family, inclusion in the society, and
other rights prescribed by the Law on Asylum. Additionally, the activities are also focused on providing
assis6tance to returnees under the readmission agreements.
The construction of the Asylum Center has been initiated, which will enable setting up of the entire
system for asylum and accommodation for the persons seeking asylum in the territory of Montenegro.
A Decree is going to be adopted on the appearance and contents of the forms and method of issuing
of documents to the persons seeking asylum, who have been granted additional or temporary

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protection and to a refugee in compliance with Article 65, paragraph 4 of the Law on Asylum, which
will prescribe the appearance and contents of the forms and method of issuing of ID documents to the
persons seeking asylum, ID documents to the persons who have been granted additional protection,
ID documents to the persons who have been granted temporary protection, Identity cards for refugees
and travel documents for refugees. Additionally, a Decree will be adopted on the contents and method
of keeping records in the area of asylum in compliance with Article 70 paragraph 2 of the Law on
Asylum, which will prescribed the contents and method of keeping records of the persons seeking
asylum, who have been recognized the status of refugees and granted additional or temporary
protection, the rights they enjoy, the documents issued in compliance with the Law on Asylum, and
temporarily withheld documents.
Ombudsman of Human Rights and Freedoms
The institution of the Ombudsman of Human Rights and Freedoms has been instituted further to
Article 81 of the new Constitution of Montenegro which prescribes that the Ombudsman of Human
Rights and Freedoms is an autonomous and independent body, which undertakes the measures for
protection of human rights and freedoms.
The Ombudsman of Human Rights and Freedoms performs the function on the basis of the
Constitution, laws, and ratified international agreements, adhering both to the principles of justice and
equity.
The institution of the Ombudsman of Human Rights and Freedoms in Montenegro has been instituted
further to the Law on the Ombudsman of Human Rights and Freedoms, which was passed by the
Parliament of the Republic of Montenegro in 2003.
The Rules of procedure of the Ombudsman of Human Rights and Freedoms have also been adopted,
which regulate in more detail the method of work and acting. The Parliament of Montenegro passed
the Decision on election of the deputy Ombudsman of Human Rights and Freedoms.
The Ombudsman of Human Rights and Freedoms, in line with the statutory powers, with the
previously obtained opinion of the competent working body of the Parliament, and/or the Electoral
Commission, on January 22, 2004, passed the Rulebook on Internal Organization and Job
Systematization of the Staff Service. In the beginning of 2005, the Innovated Rulebook on Internal
Organization and Job Systematization of the Staff Service of the Ombudsman was also adopted,
which specifies that professional and research and administrative and technical affairs in the institution
are administered by18 employees, 12 of them with university qualifications, and six with the
secondary-school qualifications. The Staff Service is headed by the secretary, who is appointed and
relieved of the duty by the Ombudsman.
The Government of Montenegro has provided the accommodation space and certain technical
conditions. A part of the equipment has been donated by the European Agency for Reconstruction.
The funds for the work of the Ombudsman are earmarked in a separate Item of the Budget of
Montenegro, which is adopted by the Parliament of Montenegro. The proposal of this item of the
Budget of Montenegro is specified by the Government, at the proposal of the Ombudsman, or the
Ministry of Finance (Article 50 of the Law on the Ombudsman). However, for certain requirements and
activities, the institution of the Ombudsman of Human Rights and Freedoms has also obtained the
financial support from certain international donors, such as: European Agency for Reconstruction,
OEBS Office, Save the Children Norway, UNICEF, Council of Europe, etc.
Article 31 of the Law on the Ombudsman prescribes that anybody who believes that, by an act, action
or by failure to act by authorities, his/her human rights and freedoms have been violated, may apply to
the Ombudsman with a complaint. The Ombudsman may be also contacted via relevant association or
organization as well as through the MPs. The complaint may be also submitted orally for the minutes
with the Ombudsman.
With respect to the work of the courts, the Ombudsman may intervene only in case of unjustified
protraction of judicial proceedings, abuse of the procedural powers (denial of procedural rights,


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                                     Government of Montenegro


untimely submittal of court decisions, etc.) or failure to enforce court decisions (Article 24 of the Law
on the Ombudsman).
Short-term priorities
     Preparation of the Draft of Amendments of and Supplements to the Law on the Ombudsman of
     Human Rights and Freedoms in the sense of strengthening of the authorities and competences in
     the area of human rights and freedoms,
     Preparation of amendments of and supplements to the Rules of Procedure of the Ombudsman of
     Human Rights and Freedoms,
     Amendments of and supplements to the Rulebook on Internal Organization and Job
     Systematization of the Staff Service of the Ombudsman,
     Strengthening of the staff of the institution of the Ombudsman of Human Rights and Freedoms,
     Providing of an adequate location and functional accommodation and space of the institution of the
     Ombudsman of Human Rights and Freedoms,
     Protection of the rights of the most vulnerable categories of the population.
Mid-term priorities
     Strengthening of international contacts through the network of European ombudsmen,
     Continuous touring of municipalities, with the aim to provide the opportunity to the citizens to
     directly apply to the Ombudsman of Human Rights and Freedoms,
     Cooperation with the OEBS mission, and other relevant regional and international organizations,
     Cooperation with NGOs.




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1.3. REGIONAL ISSUES AND INTERNATIONAL OBLIGATIONS


The Constitution provides for that Montenegro shall, on the basis of international law principles and
rules, cooperate and develop friendly relations with other countries, regional and international
organisations. In the Government’s document “Foreign Policy Priorities”, one of three priorities
envisages promotion and continuation of good neighbourly relations and regional cooperation.
Pursuant to this, Montenegro applied for membership in regional organisations and initiatives, in the
work of which Montenegro has actively participated earlier as a part of Yugoslavia and later as a
member state of the Union with Serbia. Montenegro has supported the concept of regional ownership
over initiatives from the very beginning of the promotion of this concept in the region.

1.3.1. REGIONAL INITIATIVES
As a member of the Stability Pact for South Eastern Europe (SPSEE), Montenegro has actively
participated in the working tables and made special contribution to the area of parliamentary
cooperation in the SEE region through the work of the Cetinje Parliamentary Forum. The Parliament of
Montenegro ratified the Agreement on Amendment of and Accession to the Central European Free
Trade Agreement – CEFTA 2006, which came into force on 26 July 2007, thus confirming
Montenegro’s commitment to more rapid progress in the region.
Montenegro actively participates in the process of directing SPSEE activities in the Regional
Cooperation Council. As a full member of the South-East European Cooperation Process (SEECP)
since May 2007, upon whose initiative the RCC Secretariat was established in Sarajevo, Montenegro
strives to contribute to stronger definition of the regional ownership of cooperation, through more
active engagement.
Montenegro will chair the Stability Pact Anti-corruption Initiative (SPAI) in the next two years.
Montenegro has participated in the Migration, Asylum, Refugees Regional Initiative (MARRI) even in
the previous constitutional and legal arrangement, and in October 2006, as an independent country, it
became a member of MARRI. Montenegro is also an active member of the Central European Initiative
(CEI), to which it was admitted on 1 August 2006, while on 1 June 2007 Montenegro was admitted to
the Adriatic-Ionic Initiative as well.
Since 21 September 2007, Montenegro is a member of SEE GROUP, and on 28 September 2007
Montenegro was given the observer status in the Southeast Europe Defence Ministerial (SEDM)
Process. Furthermore, on 3 December 2006, Montenegro obtained the status of observer in the
Adriatic Charter.
Montenegro initiated the application procedures for membership in various other regional
organisations and initiatives. Procedure for Montenegro’s accession to the Agreement on Southeast
European Cooperative Initiative (SECI Agreement) has been initiated, and the decision upon
Montenegro’s admission is expected.
Furthermore, Montenegro submitted an application for membership in the International Commission
for the Protection of the Danube River (ICPDR) on 5 June 2006, as well as an application for observer
status in the Organisation of the Black Sea Economic Cooperation (BSEC) on 6 June 2006.
Montenegro was given the observer status in the Danube Commission on 6 November 2006.
Short-term priorities
   Acquire membership in the SECI and the International Commission for the Protection of the
   Danube River
   Provide observer status in the BSEC.
Mid-term priorities
   Take over chairmanship over certain regional processes, organisations and initiatives (CEI,
   SEECP, MAG RACVIAC, MARRI)


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                                     Government of Montenegro



1.3.2. BILATERAL RELATIONS WITH NEIGHBOURING COUNTRIES
Good neighbourly relations and cooperation with countries in the region represent a guarantee for
successful development of Montenegro. The intention of Montenegro is to develop good relations and
communication with all neighbouring countries, with mutual respect and permanent establishing of
political, economic, security, cultural, scientific contacts and cooperation, as well as important
infrastructural connections. Montenegro shares with these countries not only the same geographic
area but the foreign policy goals as well.
Albania
Diplomatic relations with Albania were established on 1 August 2006. The Embassy of Albania was
opened in Podgorica in the first half of 2007, while Montenegro plans to open its embassy in Tirana in
the first half of 2008.
Political dialogue between the two countries is continuously conducted at the level of states’
Presidents, Prime Ministers, Ministers of Foreign Affairs and other line ministries. Therefore, in the
forthcoming period, the emphasis should be put on more concrete cooperation in numerous areas of
mutual interest. In the next five-year period, cooperation will be further intensified and common
projects implemented in the area of transport, tourism, ecology, economy, culture and education.
Bosnia and Herzegovina
Diplomatic relations at the level of Ambassadors were established on 14 September 2006. The
Embassy of Montenegro was opened in Sarajevo in 2006, while the Embassy of Bosnia and
Herzegovina in Podgorica was opened in the second half of 2007.
Bilateral relations between Montenegro and Bosnia and Herzegovina represent an example of friendly
and good neighbourly cooperation, with frequent high-level visits. Good cooperation at the political
level is upgraded by more intensive economic cooperation. For that purpose, it has been agreed to
establish an Interstate Council of Montenegro and Bosnia and Herzegovina, as well as to organise
meetings of entrepreneurs from the two countries.
Croatia
Diplomatic relations at the level of Ambassadors were established on 7 July 2006. Embassies of the
two countries have been already opened in Zagreb and Podgrica respectively.
Bilateral relations between Montenegro and Croatia represent an example of friendly and substantial
cooperation, and they have been even more strengthened by common strategic and development
goals that both countries strive to. In the last few years, an intensive and continuous political dialogue
has been conducted at the highest as well as at the high level, with strong mutual interest to upgrade
good political relations with more intensive economic cooperation. Croatia supports European and
Euro-Atlantic ambitions of Montenegro, and represents a reliable friend and partner. The Agreement
on Cooperation in Prosecuting the War Crime Suspects was signed by prosecution offices of the two
countries on 28 July 2006.
An agreement on air and passenger transport is under preparation. The issue related to Prevlaka is
currently treated by the Protocol on Interim Regime along the Southern Border between the Two
States signed in 2002, which defines the modus of functioning competences in this border area.
Macedonia
Diplomatic relations at the level of Ambassadors were established on 14 June 2006. Montenegrin
Embassy in Skopje became operational in 2006. The Macedonian Embassy in Podgorica is
functioning, as the process of issuing accreditation to the Macedonian Ambassador is under way.
Bilateral relations between Montenegro and Macedonia are very good, substantial and friendly, with
no open issues, thus creating a capital that should be used for further strengthening of overall
cooperation. Several high-level visits have been organised.



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                                  National Program for Integration


Intensive cooperation between the two countries is formally and legally verified by signing a number of
bilateral agreements, memoranda and protocols in various areas, such as environmental protection,
university partnership, cultural cooperation as well as cooperation between MFAs.
Serbia
Diplomatic relations were established on 22 June 2006. The Embassy of Montenegro in Belgrade has
been already functional for a year, while the Embassy of Serbia in Podgorica should be open by the
end of 2007. Serbia has recently appointed the Ambassador to Montenegro.
Development of closest relations with Serbia, based on principles of equality and mutual esteem,
represents one of the priorities of Montenegrin foreign policy, primarily bearing in mind the historical,
cultural and economic factors, as well as common European perspective of the two countries.
Borders between the two countries are open for free movement of people, goods, services and capital;
property status is guaranteed to the citizens of one country in the other country; issue of pension
disbursement to users residing in Montenegro or Serbia has been resolved, as well as issue of health
insurance; military property has been divided; issue of membership in international financial
institutions and definition of financial rights and obligations has been regulated; good and successful
cooperation has been developed in the area of interior affairs; intensive contacts and cooperation has
been established between the competent authorities; etc. Serbia provides consular services to
Montenegrin citizens in the countries in which Montenegro does not still have its representation
offices. Communication is continuously conducted between the line ministries and other state
authorities. For the purpose of establishing as substantial cooperation as possible, it has been agreed
to establish a Mixed Committee, which would work on further promotion of relations and resolve
concrete issues.
Italy
Diplomatic relationships have been established on 15 June 2006. Ambassadors of Italy in Podgorica
and of Montenegro in Rome have undertaken their duties at the end of 2006 ant the beginning of
2007.
A political dialog at the highest level between Italy and Montenegro has been restored during the last
several years, with the need of further strengthening. Montenegro plans to realize more concrete
working contacts at the level of governmental institutions. Italy is the largest and most influential
neighborly country of Montenegro, and it is also the only neighborly country which is a member of the
EU and NATO, so it is Montenegro’s interest to have bilateral relationships on the highest level.
Italy is, after Serbia, the largest export market for Montenegro (30% of overall Montenegrin export,
mostly aluminum). Together with Italy and other neighbors, Montenegro participates in the IPA Adriatic
cross-border program. There are several bilateral agreements between the two counties, mostly
related to environmental protection and education. These two countries also have the Agreement on
combating against crime, as well as the Agreement on cooperation between their Ministries of Foreign
Affairs.
Short-term priorities:
   -    Further strengthening and building of political, economic, safety, cultural and academic
        contacts and cooperation as well as spreading of contractual basis in these areas.
   -    Conclude agreements with neighbors on political dialogue.
   -    Intensify economic cooperation and form intergovernmental mixed committees.
   -    Strengthen cooperation in cross-border projects (in IPA and other programs).
Mid-term priorities
    -   Improve infrastructure with neighbors (building and reconstruction of border crossings,
        building of Adriatic-Ionic road, trunk Elbasan – Podgorica, building and reconstruction of
        roads connecting Montenegro and Bosnia and Herzegovina, as well as Montenegro and
        Serbia, establishing a direct airline between Podgorica and Zagreb, Podgorica and Sarajevo,
        Podgorica and Skoplje)


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                                       Government of Montenegro


     -    Finalizing the process of border marking (signing agreements on borders with countries of
          the region and neighborly countries)
     -    Intensify cooperation in the area of European integrations.

1.3.3. INTERNATIONAL COMMITMENTS
Cooperation with the International Criminal Tribunal for the Former Yugoslavia
One of the foreign policy priorities of Montenegro is fulfilling all international obligations, including a full
cooperation on all levels with the International Criminal Tribunal for the former Yugoslavia.
Acting in line with obligations arising from the tribunal’s mandate
Montenegro shows in continuity its commitment in fulfilling of mandate of the Tribunal in Hague. In the
middle of June 2007, in cooperation with Serbia, the Montenegrin competent authorities arrested in
Budva and handed over to the Tribunal one of the accused persons on the same day, thus responding
to the regional and international obligations.
Furthermore, in the case of parole of several persons, at the request of the Secretariat of the Tribunal,
in cooperation with the Ministry of Justice and the Police Administration, the information were
submitted on those persons’ adhering to the conditions defined by the Tribunal.


Steps undertaken in the plan of cooperation with the Tribunal
The Montenegrin Supreme State Prosecutor confirmed on several occasions that they will ask from
HT all information that could result in launching a procedure in Montenegro. For that purpose, a
project was initiated for training staff in the Montenegrin prosecutor’s office for using data bases
formed by the Tribunal. Furthermore, the agreements were signed on cooperation and prosecution of
perpetrators of crimes of war, crimes against humanity and genocides between the Supreme State
Prosecutor of Montenegro and the State Attorney of the Republic of Croatia and the Prosecutor’s
office for crimes of war of the Republic of Serbia, while on 6 December 2007, the Memorandum on
Technical Cooperation was concluded between the Supreme State Prosecutor of Montenegro and the
Office of the Prosecutor with the International Criminal Tribunal for the Former Yugoslavia, whereby
enabling the Montenegrin prosecutor’s office to access the Tribunal’s database, that is, to use the
system for electronic publishing.
The regional meeting held in Brioni, from 11 to 13 July 2007, where the Montenegrin Supreme State
Prosecutor was also present, was the occasion used for coordination of further actions in the Palić
process which, in the interactions of OEBS missions in RS, RH, BH and MNE with the Hague Tribunal,
stimulates and facilitates the cooperation of the competent Ministries of justice and higher courts of
these countries in realization of obligations in line with the mandate of the Tribunal, as well as in
transferring competencies of the further processing of charges for crimes within the former Yugoslavia
territory, on the level of the national higher courts responsible for these issues.
Short-term priorities
   -    Harmonize domestic legislation with obligations arising from the mandate of HT.
   -    Carrying out investigations, bringing charges and running criminal procedures against the
        committed crimes of war.
Mid-term priorities
   -   Continuing cooperation with the International Criminal Tribunal for the former Yugoslavia.




66
   National Program for Integration




2. ECONOMIC CRITERIA




                                      67
                                           Government of Montenegro



2.1. TRANSITION PROCESS IN MONTENEGRO



Montenegro is currently undergoing the final stage of transition that has been initiated in early
1990`s and that has been gradually reforming and preparing the economic system for the approaching
EU accession stage. At the very beginning, however, transition was interrupted due to the
internationally imposed sanctions against, at the time, a newly established SRY (Socialist Republic of
Yugoslavia), in May 1992. The following period saw a dramatic rise in the share of informal economy
in GDP, hyperinflation and a sharp slowdown in economic growth. 2 The subsequent fall in the living
standard and employment, accompanied by a large number of refugees and displaced persons on
Montenegro’s territory, resulted in the need for higher social and other state benefits. The
consequences of that time are still felt today, primarily reflecting in the fact that GDP is still lower than
that in late 1980`s, social benefits3 and public spending are high, and the qualitative consequence
reflecting in opportunity cost incurred for the time lost on the restructuring and transformation of the
economic system.
Continuation of the transition process was marked by Montenegro’s gaining functional sovereignty in
relation to the economic policy of SRY in the period 1997-1998.4 All segments of the economic system
experienced accelerated changes, yet the most notable was the monetary policy reform that first
involved the introduction of a dual currency system in 1999, with the Deutsche Mark and the Dinar in
circulation, and subsequently only the first currency as of 2000. The Euro became the legal tender in
Montenegro in 2002. The Euro had the most important implications for the Montenegrin economy.
Almost all distortions from the previous period, including those of socialism, came to the surface,
whereas trading and investment flows became simpler, easier and incurring less transaction costs. At
the same time, the Euro introduction affected a gradual decline in inflation from some 120% in 1999 to
4.3% in 2004, 1.8% and 2% in 2005 and 2006, respectively, and around 8% in 2007. Thus, with its
euro-based economic system Montenegro moved away from other alternatives such as the issuing of
its own currency or establishing a currency board. Therefore, with the aforesaid trends, the degree of
openness and liberalisation and the specific economic structure, Montenegro’s economic system
continued with further consolidation and growth even in the period of the State Union of Serbia and
Montenegro between February 2003 and May 2006.
In the absence of monetary policy, the main pillar of economic policy becomes the fiscal policy. In
such an environment, fiscal policy also became important as the instrument for ensuring
competitiveness and flexibility of the Montenegrin economy. Thus the fiscal system has undergone
significant changes in recent years, primarily regarding the harmonisation with EU directives and
international standards, and the creation of a competitive business environment. Value added tax,
introduced in 2003, greatly contributed to the fiscal discipline, expanding of the tax base and an
increase in public revenues. The VAT introduction marked the beginning of the process of moving the
Montenegrin taxation system towards indirect taxes with a view to reducing labour and investment
costs, thus encouraging investments. To that end, a proportional direct taxation system has been
introduced over the last two years, with a low taxation base. As of January 2005, corporate income tax
has amounted to 9%. Personal income tax amounted to 15% in 2007; in 2009 it will be 12%, and 9%
as of January 2010. This reduction to the one-digit rate will make Montenegro a candidate for the
leader in direct taxation competition, not only in the region, but in Europe as well.


2
 By 2000, GDP per capita reduced to a half the GDP in 1989. External debt of SRY amounted to over 130% of GDP and the
annual inflation exceeded 130%.
3
 Social benefits are here given in the broadest sense and include, inter alia, the burden of an excessive number of
employees in public administration and enterprises, “broad” and generally unstructured educational, health care and pension
systems, and the like..
4
 The implemented economic programme, supported by the IMF, the WB and other donors, relied on the three pillars: (i) a
well-defined macroeconomic policy; (ii) market-oriented structural reforms; and (iii) substantial financial and technical
assistance provided by the donors.

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                                       National Program for Integration


Today, Montenegro functions as market economy for the most part. The prices of electricity,
telecommunication and utilities services, and the price of coal for electricity generation are regulated
by independent regulatory agencies, i.e. public utilities companies. The prices of all other goods and
services, The European Bank for Reconstruction and Development (EBRD) graded Montenegro 4 for
“price liberalisation”, which is at the level of the neighbouring countries in transition (Croatia, Serbia,
Bosnia and Herzegovina), and also represents a remarkable progress in relation to 1999 when this
indicator was graded 2.67, same as in 1989.
The privatisation process in Montenegro can be considered as one of the most successful in the
region. More than 85% of the state-owned capital has been privatised. Of 386 joint stock companies
as on the records at end-2005 and that were subject to privatisation, the state appeared as an owner
in 107 companies or 27.7%. In other words, more than 70% of joint stock companies in Montenegro
are entirely privately-owned. The state is now the majority owner in about ten joint stock companies.
The telecommunication sector underwent the privatisation process in 2005, with the restructuring
being finished prior to the privatisation ending. Privatisation of big industrial enterprises was performed
in 2005 (Aluminium Plant Podgorica –KAP and Bauxite Mines – Rudnici boksita with the total
contracted investments of EUR 79 million;) and in 2006 (Steelworks Niksic-Zelezara Niksic with the
total contracted investments of EUR 117.9 million). Privatisation in the tourism industry was performed
in the period 2001-2007, for the most part. Owing to the privatisation of numerous Montenegrin hotels
in the previous period, serious capital investments in tourism are under way or expected, which will
result in further expansion and recovery of the tourism infrastructure in the country, especially the
hotel offer.
Privatisation in the banking sector was also completed in 2005 and 2006, for the most part, and the
current state ownership, either direct or indirect, amounts to less than 2% of total capital. The sale of
the remaining 1% of state-owned shares in five Montenegrin banks is under way, after which the state
will no longer be a direct owner in the banking sector. Banks are also free to determine their interest
rates without any restrictions imposed by the state.
As stated in the EBRD report5, business environment in Montenegro is rather liberal, with more than
32 thousand registered companies (as of 1 February 2007), which shows that company registration is
easy. The establishment of the competition protection sector in 2006, together with the Law on
Competition Protection that is to a great extent harmonised with EU standards, resulted in the
improved rating for competition policy in 2007, as assessed by the EBRD.
The signing of the Stabilisation and Association Agreement with the EU (October 2007) and joining the
Central European Free Trade Agreement (CEFTA) in December 2006, shows the country’s
commitment to the liberal trade regime. In addition, it is envisage that Montenegro will join the WTO in
2008, and a part of this process involves bilateral agreements with the EU on Montenegrin
concessions for goods and services that will be signed at end-April 2008.
The achieved progress during the transition process, especially in the eve of and after gaining
independence, was also recognised by international financial institutions. In its report, the World Bank
states that “Montenegro has made significant strides in the past year. Recent gains have built on a
solid record of transition and reform over the past decade, and since the conclusion of regional
conflicts during the 1990`s. Montenegro has successfully laid the foundations for a market based
economy, strengthened democratic institutions, and gradually built capacity in public administration to
cope with political and economic transformation. These efforts have restored macro-economic
stability, and encouraged a rapid increase in growth, which is now the strongest in the Western
Balkans.”6
A dynamic process of economic reforms in the period 2002-2007 was implemented through the
Agenda of Economic Reforms, as the key development document of the Montenegrin Government.
After the initialling of the SAA, a decision was made in June 2007 to prepare the National Program

5
    Transition report 2007
6
  World Bank, April 25, 2007, Memorandum to the Executive Directors of IDA, IBRD and IFC, Country Partnership Strategy
(FY07 - FY10)

                                                                                                                   69
                                    Government of Montenegro


for Integration of Montenegro into the EU for the period 2008 – 2012 (NPI), thus representing the
first defining of a medium-term period in which Montenegro will implement the key democratic and
economic reforms which, accompanied by the strengthening of administrative capacities, will enable a
full implementation of the SAA, a gradual harmonisation of the national legislation with the EU Acquis,
and a gradual transposition of European standards and an increase in competitiveness of the
Montenegrin economy. This will imply “internal readiness” of the country for the EU integration.
The following chapters give the projections of macroeconomic indicators in the period until end-2010.
The projections are based on the analytical financial programming technique and econometric
forecasting method for macroeconomic aggregates for which the Central Bank of Montenegro and the
Ministry of Finance have developed appropriate models. The period until the end of 2010 is the
maximum period for which it is rational to make projections based on the available data and methods.
The NPI shall be revised annually, and the projection period will be extended for each subsequent
year. Thus, at the end of 2009, we will have projections for the period ending in 2012.




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                                          National Program for Integration



2.2. EXISTENCE OF A FUNCTIONING MARKET ECONOMY

2.2.1. MACROECONOMIC STABILITY

2.2.1.1. Macroeconomic trends until 2007


                              Montenegro – Main economic indicators, 2005-2007
                                                                                   2005            2006            2007
    GDP in market prices, EUR million                                          1815,00         2148,90           2422,8
    Real GDP, EUR million                                                        1739,6          1970,5              n.a.
    Real GDP growth, %                                                               4,2             8,6             8.2
    Population (000), mid-year estimate                                           623,3           624,2           626,2
    GDP/per capita                                                                 2912            3443            3869
    RPI Inflation, %7                                                                1,8               2               8
    Employment growth (per person employed), %                                     0,61             4,46            3,72
    Unemployment rate, %                                                           18,5             14,7            11,9
    Public sector surplus/deficit, % of GDP                                         -2,1             3,4            7,02
    Export of goods and services, market prices, EUR million                      790,4        1066,36          1301,78
    Goods and services exports increase, %                                              -           34,9            22,1
    Goods and services imports, market prices, EUR million                     1108,50           1718,6          2385,8
    Goods and services imports increase, %                                              -           55,0            38,8
    Trade balance of goods and services, market prices, EUR                      -318,1         -652,23           -1084
    Trade balance of goods and services, % of GDP                                  -17,5           -30,4           -44,7
    Current account balance, market prices, EUR million                            -154          -531,2         -1007,6
    Current account balance, % of GDP                                              -8,46         -24,72           -41,59
    Gross capital formation, nominally, EUR million                               326,3           469,8           545,1
    Gross capital formation, nominally, %                                             18            21,9              24
    Gross capital formation, % of GDP                                               513             504           481,0
    External debt, EUR million                                                     28,3             23,5            18,9
    External debt, % of GDP                                                       380,1          466,70          524,88
    Net foreign direct investments, % of GDP                                       20,9             21,7            21,6


                                        Source: MONSTAT, CBM, Ministry of Finance, 2008;

Macroeconomic developments in Montenegro in 2006 and 2007, in comparison with the previous
period, were characterized by the following:: (i) acceleration of real economic growth from 4.2% in
2005 to 8.6% in 2006 and 8.2% in 2007; (ii) maintenance of a low level of inflation of 2% in 2006 and

7
  The retail price index (RPI) is used to measure inflation because it provides better quality time series for forecasting
purposes than the cost of living index. Monstat will introduce the CPI index as of 2008. The base year for the CPI calculation
will be 2007. Namely, in the current year, the base with products which will be categorised according to the COICOP is being
formed; the Household Budget Survey (HBS), which is the base for CPI weight calculation, has been conducted in line with
the COICOP.

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                                      Government of Montenegro


its increase to 8% in November 2007, (iii) accelerated and ongoing decline in unemployment from
18.5% in 2005 to 14.7% in 2006 and 11.9% in 2007, (iv) maintenance of the public sector surplus at
some 3% of GDP in 2006 and 7.4% of GDP in 2007, (v) large growth in exports (by 34% in 2006 and
22.1% in 2007) which was, however, followed by a much more rapid increase in imports (of 55% in
2006 and 38.8% in 2007), (vi) developments in international trade in goods and services led to a rapid
increase in the trade deficit of goods and services, which reached remarkable amounts of -24.7% in
2006 and 41.6% in 2007. A surplus in the balance of income and current transfers just slightly offset
this deficit; (vii) an increase in gross capital formation, which raised from 18% of GDP in 2005 to
21.9% in 2006 and its further uptrend in 2007; (viii) the current account deficit is largely covered by net
inflows of foreign direct investments, and to some extent by an increase in other foreign investments;
(ix) high labour productivity increased by 9.1% and 11.7% in 2006 and 2007, respectively.
Gross Domestic Product Growth
Real GDP growth amounted to 8.6% in 2006, and it was primarily driven by increasing demand in
construction, tourism, the banking system and foreign direct investments (FDI). The capital formation
level increased from 18% of GDP in 2005 to 21.9% in 2006, and even 24% of GDP in 2007, observed
as nominal values. The reconstruction of infrastructure and the building of a large number of hotels
resulted in a rather high growth rate in construction. A high rate of growth in tourism affected the
development of many other branches, primarily transportation, trade and agricultural-food industry.
Strong FDI inflows resulted in the creation of additional demand due to investments in modernization
of enterprises. GDP growth accelerated in 2007 and according to the Montenegrin Secretariat for
Development it amounted to EUR 2,422.8 million, showing the year-on-year growth of 8.2%. Once
again the main instigators of GDP growth were the increasing tourism and transport activities. The
observed period was also characterised by an increase in employment and a further decline in
unemployment. Industrial output rose by 0.1% in 2007, whereas manufacturing industry recorded a
9.3% increase. The period-on-period increase in industrial production amounted to 7.1% in the first
four months of 2008. All three industrial sectors recorded growths in relation to the comparative period
of 2007 (the mining and quarrying sector by 20.3%, manufacturing industry by 1.6% and the
production of electricity, gas and water supply by 19.4%).
Inflation
Montenegro maintained price stability in 2006. The RPI inflation in 2006 amounted to 2%, i.e. 0.2
percentage points more than in the previous year. The prices of goods and services accounted for
1.61 percentage points and 0.39 percentage points of inflation, respectively. The prices of goods rose
2% in 2006. The main contributors to this growth were the prices of the basic food products, oil, and
agricultural products. The prices of services also rose 2% in 2006. Within this category, the highest
growth was of the prices of housing/utilities services (6.3%), then craft services (3.2%) and financial
services (5.2%). The cost of living experienced a more rapid growth than retail prices, the annual rate
in 2006 being 2.8% owing to a larger share of industrial food products and agricultural products in the
overall basket of goods and services which is the base for the cost of living index calculation. The
producers’ prices of manufactured products grew faster than both retail prices and the cost of living,
but their growth slowed down from 3.5% in 2005 to 2.9% in 2006. An average monthly growth rate of
the producers’ prices amounted to 0.24%. The highest increase recorded the prices of consumer
goods (5.5%), then the prices of intermediate goods (1.6%), while the prices of capital goods did not
change.
However, prices soared in 2007. Measured by the cost of living index and in comparison with the
previous year-end, prices increased by 1.1% in June 2007, whereby the prices of goods increased by
1.1%, and those of services by 1.2%. The annual increase in the cost of living amounted to 1.6% in
June, whereas in the first six months of 2007 they rose by 2.3%. Prices` movements over the first half
of 2007 were mainly determined by the higher prices of: (i) food products, which increased 1% and
their share in total inflation was 47.4%; (ii) liquid fuels and lubricants, which increased by no less than
8.7% and accounted for 32.8% of inflation; (iii) transportation and postal and telecommunication
services, which increased by 4.1%, contributing 37.6% to inflation; (iv) clothing and footwear, which
increased by 0.9% and accounted for 7.2% of inflation.

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A new growth in prices occurred in September 2007, so that the year-on-year inflation in this month,
measured by the cost of living index, amounted to 6.5%. Prices movement in the first nine months of
2007 (and later on) was determined by five groups of factors:
a/ Structural, i.e. developments in the real estates market. Namely, at end-2006, and especially during
   2007, there was an enormous growth in real estate prices, primarily generated by the growth in real
   estates turnover at the seaside, and FDI inflow in this market, which had a spillover effect on the
   prices of real estates, primarily in Podgorica.
b/ Methodological, i.e. changes in the methodology for calculating the prices of electricity by Monstat.
   To wit, as of July 2007, Monstat has started calculating the imported electricity for the first time
   (within the category electricity and lighting) which, together with the real growth in the prices of
   electricity in September 2007, resulted in an increase of 30.5% as of December 2006.

c/ Internal, i.e. inflation was predominantly influenced by growth in the prices of phone call charges
   and movements in the prices of electricity. In September 2007, the prices under the category
   ''transportation and postal services“ were 23.7% higher than at end-2006 due to the higher prices of
   phone call charges in fixed telephony.

d/ External, since due to increases in global oil prices, growth in the prices under “liquid fuels and
   lubricants” category amounted to 6.9% in the first nine months of 2007, with further growth being
   expected due to the strong growth in global oil prices which continued by the year-end.
e/ Seasonal character of agricultural products had a somewhat stronger than usual influence on the
   prices’ movements during the year owing to the poor agricultural season on international markets.
   Comparing to 2006 year-end, the prices of agricultural products were 11.9 % higher (observed
   through retail prices). The prices of fresh seasonable vegetables and fruit rose in the first nine
   months of 2007 by 4.7% and 24.2%, respectively (observed through the cost of living).


Taking into account a further increase in global oil and oil derivatives prices during October, November
and December, as well as a potential catch-up effect of the prices of domestic food products, the year-
on-year growth in inflation amounted to 8% in 2007. The RPI inflation recorded an increase of 9% in
April 2008, whereby the prices of goods and services rose by 7.9% and 13.6%, respectively.
Inflation in Montenegro, measured by the cost-of-living index, amounted to 7.7% in 2007. The average
annual cost-of-living growth rate was 4.2%. An increase in food prices of 6.77% and services prices of
11.93% both had strong influence on the inflation growth. Growth in the prices of seasonal products
under the seasonal vegetables group and the non-seasonal/seasonal fruits group (26.19% and
13.10% at the annual level, respectively) both had influence on the increase in the overall nutritional
quality index.
The annual growth in the cost of living amounted to 9.1% in April 2008, whereby the prices of goods
increased by 8.8% and that of services by 11.8%. Food prices recorded the annual growth of 11.1%
and accounted for 62% of the annual inflation of 9.1%.


Labour market
Growth of economic activity during 2006 and 2007 reflected positively on the labour market, as viewed
in an ongoing increase in the number of employees and a decline in the number of registered
unemployed persons. The rate of unemployed people on the records of the Employment Agency
reduced from 18.5% in 2005 to 11.9%8 in 2007, and the number of employees respectively increased
from 145,261 to 159,223. The highest growth in the number of employees was recorded in trade and
8
 According to MONSTAT data, the respective unemployment rates in 2005, 2006 and 2007 amounted to 30.3%,
29.6% and 19.3%.

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                                       Government of Montenegro


repair, real estates related activities, construction and hotel industry and restaurants. The number of
employees decreased in the sector of agriculture (by 6.7%), transportation (by 11.8%), and education
(by 1%). The number of non-resident employees in 2007 rose 63%, mostly in construction and
tourism.
During 2007, the number of employees amounted to 150,408, on average, thus being 3.7% higher
than in the previous year. The highest growth in employment was in public administration which is,
however, the consequence of the changed statistical methodology.9 Growth in the number of
employees was also recorded in the trade and repair sector, manufacturing industry, and health and
social insurance. All other sectors recorded declines in the number of employees. The structure of
employees in the three main sectors shows that in mid-2007 most employees were in the sector of
services, 40.2%, followed by the public sector with 31.6% and production with 28.2%. The number of
employees in the services sector is on an upward trend, whereas employment in the production sector
is declining. The number of employees recorded in March 2008 amounted to 162,737, which is 6.3%
more than in the corresponding month of 2007.
Simultaneously with the increase in employment, the number of unemployed people on the records of
the Employment Agency reduced, whereby the pace of this decline in 2006 and 2007 was more
accelerated than in 2005. During 2006, there were 43,190 unemployed people, on average, or 20%
less than in 2005. In December the same year, the Employment Agency had 38,876 unemployed on
the records, which is 20.4% less than in the corresponding month of 2005. The number of unemployed
people continuously declined during 2007, which is primarily the result of a successful tourist season
and activities of the Employment Agency aimed at employing as many seasonal workers as possible
during the season. Thus, 6,780 of seasonal workers were employed via the Employment Agency in
2006, which was 23% more than planned for that year. The number of registered unemployed people
averaged 37,216 in the first half of 2007, which is 21.2% less than in the same period of the previous
year. The Employment Agency records in June showed that 33,393 people were looking for
employment. Positive trends on the labour market continued, thus the Employment Agency’s records
showed a mere 31,469 unemployed persons in December 2007. The same records for March 2008
show the number of 30,270 of unemployed people, which is the year-on-year decline of 19.4%.
An uptrend in average net salaries continued in 2006, thus an average net salary amounted to EUR
282, which is much more than in 2005 when it was EUR 213. In November 2007, an average net
salary amounted to EUR 334 or 18.9% more than a year before. An average salary without taxes and
contributions amounted to EUR 338 in 2007, showing the year-on-year growth of 19.9%, whereas in
April 2008 it amounted to EUR 402, being 23.3% higher than in the same month of the previous year
(EUR 326). An average pension amounted to EUR 139.70 in 2006, being 9% higher than in 2005,
whereas in November 2007 it was EUR 165.63 or 18.5% more in comparison with the previous year.
In December 2007, it amounted to EUR 185.67.
Monetary developments and lending activities
In 1999, Montenegro introduced a foreign currency as the legal tender. The fact that the country does
not issue its own currency, yet having a fully liberalised current and capital transactions regime,
means that there is almost no room for monetary policy actions. Although the Central Bank of
Montenegro (CBM) does not have its own monetary policy, it still plays an important role in the
supervision of banks and other financial sector institutions, maintenance of financial stability, interbank
payment system, performing the role of the fiscal agent and depository of the Government, managing
foreign exchange reserves, distribution of banknotes and coins to banks, research, statistics, and
communicating recommendations to the Government regarding economic policy, and the like.
Of monetary policy instruments available, the CBM have primarily used the reserve requirements. The
main purpose of the reserve requirement instrument in the past was to stabilize and return confidence
in the banking system. This resulted in a 100% reserve requirement rate at the beginning of the

9
 Since 2007, Monstat has started statistically covering employees of the Ministry of Interior and the Army as
public administration employees. This change was not applied retroactively to the previous year, which made the
comparison impossible.

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banking system reform in 2002. It was reduced very quickly, and as the confidence in the banking
system gradually returned, this rate reduced to the current 19%, i.e. 2%. Now it can be used to
regulate banking loans and affect the maturity structure of deposits. There are plans to gradually
decrease the reserve requirement rate to the EMU level as Montenegro approaches the EU, and later
on the EMU.


The broadest monetary aggregate in Montenegro is M21. At end-2006, it reached the level of almost
EUR 1.6 billion, with the annual growth rate of 82.9%. In that year, M21 grew at an average monthly
rate of 5.2%, as compared to 4.1% in 2005. The increase in monetary aggregates was the result of
GDP increase, a high inflow of FDI funds, transfers from abroad, inflow of funds in tourism, corporate
foreign borrowing, etc. The change in the reserve requirement instrument did not slow down credit
growth or either that of the money supply M21. An increase in money demand and monetary assets
did not have en effect on inflation increase. Movements of money supply in 2006 were under the great
influence of the tourist season and periods of FDI inflows.


Although the monetary aggregate M11 accounts for the largest portion of the money supply M21
(69.2%), its share significantly decreased in relation to 2005 year-end when it amounted to 70.9%.
Simultaneously, the share of time deposits increased from 29% at 2005 year-end, to 30.8% at 2006
year-end. High liquidity of banks and the implementation of the new decision on reserve requirements
influenced the increase in the aggregate M0, so at end-2006 it was 37.8% higher than at end-2005,
whereas banks' deposits in the CBM within this aggregate were twofold the amount recorded a year
earlier.


The accelerated growth in monetary aggregates continued in 2007. With an average monthly increase
of 4.7% over 2007, the money supply M21 reached the amount of EUR 2.7 billion at end-2007. This
level was EUR 1.1 billion or 71.95% higher than at end-2006. Such a high annual increase of M21 was
supported by growths in all monetary aggregates: M0 rose 22.4%, mainly due to an increase in the
allocated reserve requirements; M11 increased 41.73% (with demand deposits included in the money
supply increasing by 58.5%), and time deposits included in the money supply increased by 140%. The
money supply M1 also increased, thus being 42.3% higher at end-2007 than at the end of the previous
year, which was contributed by both the increase in allocated reserve requirements and the increase
in demand deposits by the non-governmental sector held with banks and the CBM.


At the end of Q I 2008, the money supply M21 amounted to EUR 2.76 billion, showing an increase of
1% as of December 2007, while its annual increase amounted to 50.2%. The share of demand
deposits in the M21 structure rose from 42.6% at end-2007 to 47% at end-March 2008.




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                                    Government of Montenegro




                           Money supply in 2006 and 2007, EUR million

         3000             M11
                          Time deposits
         2500
                          M21
         2000

         1500

         1000

          500
           0
                 I Ql    II Q      III Q         IV Q        IQ         II Q      III Q   IV Q
                                2006                                            2007


                                           Source: Central Bank of Montenegro

Favourable macroeconomic trends and a dynamic economic activity resulted in an increase in
confidence in the banking sector, accompanied by a better offer of loans and a further decrease of
interest rates.
Assets of all banks grew over 2007, reaching the amount of EUR 2,975.4 million, which is an increase
of 107.9% in comparison with end-2006.
Deposits amounted to EUR 2,091.1 million, showing a growth of 94.4% as of end-2006. The analysis
of the structure of total deposits indicates that deposits by households amounted to EUR 1,019 million,
recording the year-on-year increase of 104.1%.
Lending activity in 2007 resulted in the amount of EUR 2,246.6 million worth of loans at the year-end,
which is the annual increase of 165.2%.
A downward trend of lending interest rates continued in 2007. Thus, the average weighted effective
interest rate amounted to 9.09%, which is the annual decrease of 0.85 percentage points. Positive
trends of the main banking sector indicators continued in Q I 2008.
Total assets of banks grew over Q I 2008, exceeding the amount of EUR 3 billion (EUR 3,124.5
million) at end-March, which is the year-on-year increase of 80.2%.
Total deposits amounted to EUR 2,140.1 million at end-March 2008, showing a 2.3% and 64.7%
growth in comparison with December and March 2007, respectively. Deposits by households reached
the amount of EUR 1,061 million, showing respective growths of 4.1% and 71%.
Banks` lending activity slowed down during the first quarter of 2008, thus proving the efficiency of
measures introduced by the Central Bank of Montenegro aimed at curbing credit growth. Thus, total
disbursed loans amounted to EUR 2,467.9 million, showing an increase of 9.9% over the quarter,
which is much less than the comparative growth in 2007 (March 2007/December 2006) of 36.1%.
The weighted average lending interest rate amounted to 9.16% at end-March 2008.
Capital market
The capital market experiences an intensive growth. Total turnover on the Montenegrin stock
exchanges amounted to EUR 377 million in 2006, which is a 90% or EUR 178.6 million increase in
comparison with 2005. The stock exchange indices also recorded remarkable increases: the MOSTE
index amounted to 918.88, which is the annual increase of 98.44%. The NEX 20 amounted to
18.050,80 and NEX PIF 17.763.63, thus recording increases of 84.54% and 119.42%, respectively.

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In 2007, turnover on the stock exchanges amounted to EUR 727 million, almost twofold more than in
2006. All three indices, MOSTE, NEX 20 and NEX PIF, again recorded remarkable growths of 77.1%,
89.3% and 120.8%, respectively, amounting to 1.627,69, 34.168,63 and 39.229,17. Capitalisation on
the Nex Montenegro and Montenegro stock exchange amounted to EUR 3.58 billion and 3.69 billion,
being higher than at end-2006 by 84.1% and 122.7%, respectively.
The turnover in Q I 2008 amounted to EUR 56.9 million, which is 74% and 51.2% less than in the
same period and end-2007, respectively. All three indices declined in comparison with end-2007 –
MOSTE by 412.4 index points or 25.3%, NEX PIF by 11,543.14 index points or 29.4% and NEX 20 by
9,209.77 index points or 27%. Compared to their maximum values reached in 2007, the respective
indices declined by 50.5%, 45.5% and 48.7%.
Fiscal policy and public debt
In the context of a euroised economy, fiscal policy is the vital macroeconomic policy tool, as it
represents the only significant tool for counter-cyclical acting of economic policy, i.e. ensuring an
efficient managing of strong demand pressures.


A share of public spending in GDP is an indicator of the importance of public finances in the creation
of overall economic policy of Montenegro. It is estimated that the share of public spending in 2007 will
be at the level of nearly 48% of GDP; here it is important to keep in mind that the official GDP is still
lower than the real GDP, to some extent. Recently, the Government of Montenegro has significantly
reduced tax rates all with a view to creating a favourable environment for investments and economic
growth, which again implies that the increase in fiscal revenues came from the combination of
increased economic growth and a significant broadening of the tax base. Such a policy enabled an
increase in fiscal expenditures, primarily capital expenditures designated for the infrastructure
improvement. Such a high share of public spending in 2007 (and the projected public spending in
2008) in relation to the previous years is partially a consequence of the inclusion of the Development
Fund and the Restitution Fund in the consolidated balance of public spending for the first time.


During 2006 and 2007, Montenegrin public finances went through significant changes not only as
compared to the previous years, but also as compared to the public finances projections made in the
previous years. Owing to a remarkably high rate of economic growth, accompanied by a rapid growth
in trade and a large inflow of foreign investments, the realization of the public revenues is significantly
higher than initially planned. In 2006, public revenues increased by 5.6% of GDP as compared to
2005, and their share in GDP rose from 39.8% in 2005 to no less than 45.4% in 2006. The increase in
public revenues exceeded by far the growth in the consolidated public spending. In 2006, consolidated
public spending increased by 1.5% of GDP in relation to the previous year, and in 2006 it amounted to
42.0% of GDP. As the consequence of such trends, Montenegrin public finances balance went from a
deficit of 2.26% of GDP in 2005 to a surplus of 3.4% of GDP in 2006.
Favourable trends in public finances in 2006 continued in 2007 as well. High economic growth, as
followed by strong growth in imports, led to an increase in direct revenues to the level of EUR 790.94
million, i.e. 34.72% of the projected GDP, being 8.13% higher than planned by the rectified budget.
Compared to 2006, direct budget revenues recorded an increase of 39.5% in 2007. Consolidated
public spending in the period January – December 2007 was estimated at EUR 1,075.43 million 1
(47.21% of GDP). A share of current public spending in 2007 (consolidated public spending less total

1
 The estimate was made on preliminary data on the Budget of Montenegro, the Pension and Disability Insurance Fund and
the Employment Agency and data on budgets of the Health Insurance Fund and local self-governments for the first nine
months of 2007 and trends from the previous years. The estimated level of public spending was financed from the taxes to
the amount of EUR 777.61 million, duties EUR 39.79 million, contributions EUR 288.34 million, compensations EUR 88.66
million, and other receipts EUR 68.82 million. Revenues from taxes in this period were planned to the amount of EUR 714.73
million, revenues from duties EUR 36.73 million, revenues from contributions EUR 249.89 million, revenues from
compensations EUR 87.31 million and other receipts to the amount of EUR 58.24 million.



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                                           Government of Montenegro


capital expenditures – the Capital budget of Montenegro, capital expenditures in the current budget,
and capital expenditures of the state funds and municipalities) was estimated at EUR 915.87 million,
which accounts for 40.21% of GDP for the year. An increase in public spending from EUR 841 million
in 2006 (42% of GDP) to EUR 1,075.43 million in 2007 (47%) was rather evenly distributed for current
public spending that is planned to increase by some EUR 100 million and capital expenditures that are
planned to increase by around EUR 90 million. It should be stressed that the envisaged increase in
capital expenditures represents a twofold increase over just two fiscal years – from EUR 62 million or
3.1% f GDP in 2005 to EUR 150 million in 2007.


Public debt of Montenegro, without public enterprises, amounted to EUR 782.2 million or 34.3% of
GDP. The main share of the public debt is of foreign debt of EUR 478.1 million or 21.3% of GDP, while
the remaining EUR 285.1 million or 12.9% of GDP refers to the internal public debt. According to the
analysis of the public debt sustainability, as based on the macro-fiscal scenario for 2008-2010,
liabilities for restitution will reach the limit of 10% of GDP in 2008 (the annual servicing of these
liabilities is up to 0.56% of GDP) and liabilities arising from frozen foreign currency deposits will be
some EUR 20 million. According to this scenario, overall public debt at end-2008 will be over 3
percentage points higher than in September 2007, reaching the amount of around 37.1% of GDP.
The debt sustainability analysis2, the core scenario, prepared on the basis of macroeconomic
indicators in the period 2008-2010, shows that the debt is sustainable as it will gradually reduce to the
level of 30% by 2010. However, the projections did not cover potential future debt arising from the
construction of motorways.
Balance of payments
The accelerated economic growth of Montenegro is reflected in a fast increase in the volume of the
current account transactions in 2006 and 2007. The fastest growing were services trade and visible
import. However, the upward trend in the current account transactions was followed by rather
accelerated current account deterioration. In 2006, the current account deficit amounted to EUR 531.2
million or 244.8% more than in 2005. Thus the current account deficit increased from 8.5% of GDP in
2005 to 24.7% of GDP in 2006. The foreign trade deficit, which was 1.6 times higher than the current
account deficit (42.4% of GDP), predominates in the current account balance; the import/export
coverage was 43.2%, which is 4 percentage points less than in 2005. Other current account sub-
accounts recorded surpluses which, however, could not cover the fast-growing foreign trade deficit.
Such an unfavourable current account trend continued in 2007. The current account deficit reached
the amount of EUR 1,007.6 million or 89.7% more than in 2006. This resulted in the current account
deficit increase of 41.6% of GDP. The foreign trade deficit was 1.51 times higher than the current
account deficit (62.9% of GDP); the import/export coverage was 29.2% which is 14 percentage points
less than in 2006. The foreign trade deficit coverage with surpluses recorded on other current account
sub-accounts was 33.9% which is 3.6 percentage points less than in 2006. Surplus increase on the

When compared to planned amounts for the period January-December 2007, the received amounts show growth of 10.28%
(current revenues), tax revenues 8.80%, duties 8.33%, compensations 1.54%, contributions 5.54%, whereas other revenues
were 18.2% higher than the planned amount. Better collection of current revenues enabled debt repayment to domestic and
international financial institutions to the amount of EUR 121.30 million, which is 31% more than the planned EUR 92.60
million, while the repayment of call in arrears from previous years was EUR 46.97 million, which is 76.4% more than the
initially planned EUR 26.63 million. All claims due were regularly serviced.
Current cash surplus of public spending for the period January - December 2007 was planned to the amount of EUR 91.99
million, and the surplus recorded was EUR 193.79 million, which makes 8.51% of estimated GDP for 2007. Surplus is the
largest in the Budget of Montenegro, EUR 168.45 million, while in the Pension and Disability Insurance Fund the surplus
amounted to EUR 2.41 million. The Employment Agency recorded a deficit of EUR 0.5 million, the Health Insurance Fund a
surplus of EUR 10.98 million, and local self-governments ran a surplus to the amount of EUR 12.45 million. An increase in
deposit in 2007 was estimated to the amount of EUR 97.98 million.
2
  The main assumptions for the sustainability analysis are: liabilities for restitution will reach the statutory limit of
10% of GDP, the debt servicing programme that has been launched in 2007 and will continue in 2008, the
amount being EUR 46 million, and new borrowings will be made in line with the Government’s strategy and only
for the purpose of financing significant infrastructural projects.

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                                  National Program for Integration


services sub-account (EUR 440.1 million or 18.2% of GDP) and factor income revenues continued, as
well as a downward trend in the surplus arising from transfers.
The generators of the current account deficit increase are primarily the powerful growth of foreign
direct investments and disbursed loans. The FDI inflow in Montenegro in 2006 amounted to EUR
644.3 million, while their outflow was EUR 177.6 million. As for portfolio investments, an inflow of EUR
43.8 million and outflow of EUR 48.3 million were recorded. The inflow of funds from other
investments was EUR 434.7 million, the outflow being EUR 281.3 million. Most of the loans disbursed
were invested in the field of tourism. FDI inflow and outflow in 2007 amounted to EUR 1,007.7 million
and EUR 482.8 million, respectively. The inflow and outflow of portfolio investments totalled EUR
119.3 million and EUR 124.2 million, respectively. The inflow of other investments was EUR 1,157.3
million and their outflow was EUR 799.2 million.
Exports are not increasing fast enough at the moment and there are obvious problems in its structure.
The export of aluminium and aluminium products accounted for the main share in the exports structure
with 47.03% in 2007, followed by the export of steel and iron (11.9%), mineral fuels (8.6%), and
beverages and alcohol (5.2%). It is reasonable to expect that competitiveness of the domestic
economy will increase in the future as a consequence of accelerated economic growth and large
investments, which will affect a further increase in exports and a decrease in the foreign trade
imbalance. At the same time, investments in commercial activities that will bring about an increase in
exports should be accompanied by substantial investments in infrastructure (transportation, energy,
water supply, and the like) which, together with growing exports, will also lead to growth in imports.
Therefore, it is reasonable to expect that the foreign trade imbalance will reduce only in the long-term.
The Montenegrin economy is far more competitive in services. Thus, a powerful growth in 2007 was
recorded in the services trade, these primarily being tourism, construction, communication, and
various professional and technical services. The total volume of services trade in 2007 amounted to
EUR 907.9 million, which is 42.1% more than in 2006. Revenues from services amounted to EUR
674.1 million, increasing by 61.3% when compared to the previous year. The highest recorded
revenues came from travel EUR 459.5 million, then transportation, EUR 71 million, construction
services, EUR 49.8 million, and other business services, EUR 46.8 million.
Preliminary data show that the current account deficit in Q I 2008 amounted to EUR 390.9 million or
66.6% of GDP, being 80.3% larger than in the corresponding period of 2007. The year-on-year foreign
trade deficit in this quarter amounted to 66.8%. The visible export/import coverage amounted to
20.8%, which is 15.3 percentage points less than in Q I 2007. The services sub-account also recorded
a deficit of EUR 5.7 million, whereas the income and current transfers recorded surpluses.
Net FDI inflow in the first three months of 2008 totalled EUR 129.5 million, whereby total FDI inflow
and outflow amounted to EUR 215.2 million and EUR 85.7 million, respectively. Portfolio investments
recorded an inflow of EUR 4.3 million and a EUR 12 million outflow. The respective inflow and outflow
of Other investments amounted to EUR 324.3 million and EUR 133.4 million.

2.2.1.2. Macroeconomic and fiscal projections for the period 2008 - 2010
Macroeconomic projections
The medium-term projections of macroeconomic indicators and their elements are based on the
analytical financial programming technique aimed at tuning monetary, fiscal and structural policies with
a view to maintaining stability of the main macroeconomic indicators of Montenegro and the country’s
economic growth.
The main preconditions underlying the real scenario projections of Montenegro's development in the
period 2007 – 2010 are as follows: (i) no momentous external shocks in oil prices, (ii) no major foreign
borrowing, (iii) FDI in real estates continues in 2008 at a somewhat slower pace, slowing down
considerably later on, (iv) tourism growth in accordance with the Master Plan of the Ministry of
Tourism and Environmental Protection 2005 – 2020, (v) no major turbulence on the global financial
market that could reflect on the level of direct and portfolio investments, (vi) Montenegro has more
investments projects in the medium-term that cannot be financed from domestic savings, thus relying

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                                      Government of Montenegro


on foreign investments entailing a high balance of payments deficit, (vii) portfolio investments in the
forthcoming period have positive effects on real economy, but their share in relation to the level of
long-term investments remains at a low level, (viii) continuation of structural reforms, particularly those
of further liberalisation of capital and financial transaction and the development of corporate
governance tools (reduced influence and the implementation of International Accounting Standards
(IAS).
Taking into account a noticeable real GDP growth in 2006 and 2007, the projection was based on its
further growth that will be somewhat slower after 2008 primarily due to a gradual slowdown in
aggregate demand, lower FDI inflows, a slowdown in household loans and fiscal expansion. Thus the
average real GDP growth rate in the period 2007-2008 is projected at the level of 7%, with the
corresponding rate in the period 2009-2010 being 5.75%.
Considering a high degree of openness of Montenegro, potential external shocks could have negative
effects on its further growths, so the emphasis of development in the period 2007-2010 will be put on a
coherent acting of both fiscal and monetary policy. The actions and results of these two policies could
be divided in two periods: 2007-2008 and 2009-2010. The following table gives an overview of the
main macroeconomic indicators as results of the aforesaid policy actions.




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Main economic indicators for the period 2006-2010

                        Year                            2006          2007       2008       2009         2010
GDP in market prices, EUR million                        2148,9       2422,8     2696,5      2966,2       3218,3
Real GDP growth, EUR million (constant prices)           1970,5      2325,00    2488,00     2871,00       3129,3
Real GDP growth, % (constant prices)                           8,6        8,2           7          6,5          5,5
Nominal GDP growth, %                                         18,4       12,7       11,3           10           8,5
Inflation, %                                                   2,0        8,0        8,0           3,5          3,0
Deflator, %                                                      -        4,2        8,4           3,3          2,8
Employment increase (persons), %                              4,46       3,72        3,7           2,1          2,1
Unemployment rate, %                                          14,7       11,9       10,8           9,8          8,8
Public sector surplus/deficit, % of GDP                        3,4        7,0       3,31       1,59         1,39
Export of goods and services, market prices, EUR       1066,36       1301,78    1.485,23    1660,86      1834,43
Goods and services exports increase, %                        34,9       22,1       14,1       11,8         10,5
Goods and services imports, market prices, EUR         1718,59       2385,82    2561,68     2669,58      2767,74
Goods and services imports increase, %                         55        38,8        7,4           4,2          3,7
Trade balance of goods and services, market             -652,23      1084,04     -1076,4    -1008,7       -933,3
Trade balance of goods and services, % of GDP            -30,35        -44,74      -39,9      -34,0        -29,0
Current account balance, market prices, EUR             -531,21      -1007,64    -991,44    -923,72      -848,31
Current account balance, % of GDP                        -24,72        -41,59      -36,8      -31,1        -26,4
                                                                 3
Gross capital formation, nominally, EUR million         469,81         545,1      647,2       682,2        724,1
Foreign debt, EUR million                                     504      481,0        504        521          513
External debt, % of GDP                                       23,5       18,9       18,7       17,6         15,9
External debt/exports ratio, %                            47,26        35,50      33,93       31,37        27,97
FDI – net, mil €                                         466,70       524,88     620,20      652,56       643,66
FDI – net, % of GDP                                           21,7       21,6        23            22           20
Labour productivity increase, real                            9,15       11,7        3,2       13,1             6,8


On the other hand, an appropriate scenario has been made on the basis of assessment of the major
economic problems currently existing in Montenegro and which need to be stabilised in the medium-
term. The pertinent macroeconomic indicators that will be in focus over the period 2008 – 2010 are the
maintenance of low inflation and reduction of foreign trade deficit. With regard to the first, after price
stability in the period 2004 -2006, there was an upsurge in inflation in 2007 owing to the combination
of increased aggregate demand following increase FDI inflow in real estates, nominal growth in
salaries outstripping productivity and finally, unfavourable developments on the market of agricultural
products, global oil prices, and decisions of Electric Power Company (EPCG) and Telecom to increase
electricity and fixed telephone charges, respectively. Reduction of the foreign trade deficit will be the
second major challenge for Montenegro in the upcoming period when taken into account that the level
of current savings definitely cannot finance either current or expected investment projects. In addition,
excessive capital borrowing, primarily through foreign investments inflow (capital account surplus) led
to a large foreign trade deficit in 2007. Thus, in order to reduce the balance of payments deficit (as
measured by its share in GDP) and change its structure (a larger share of goods designated for

3
    MONSTAT,”Gross Domestic Product of Montenegro for 2006”

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                                     Government of Montenegro


investments, instead of final private consumption) the combination of the following will be applied: a
restrictive monetary policy (affected a slowdown in credit expansion), a restrictive fiscal policy,
primarily the public sector wage policy, and the structural policy with the main objective being an
increase in aggregate supply through increased labour productivity, reduced production costs, a
development of the SME sector, and a more effective allocation of investment flows.


Fiscal projections
Montenegro, a small and open economy, will continue strengthening economic freedoms as the
prerequisite for further expanding of a market economy and adhering to the criteria and principles of
the world market. The basis of a stable, long-term growth should be the strategy of economic growth
which underlines the need to integrate into global trends and market. A long-term stable and
competitive economy is the main guarantor of market economy development based on free trade of
ownership rights. To that end, the strategic priorities identified are the following:
    implementation of sustainable development principles, followed by a raised level of economic
    freedoms and the strengthening of the private sector involvement;
    strengthening of the rule of law as the prerequisite for the building of modern parliamentary
    democracy institutions and the protection of the basic human values and rights, and
    improvement of living standards by offering better quality public services via efficient and
    sustainable systems of education, health care and social protection.
In a euroised economy, fiscal policy is practically the only macroeconomic policy instrument. It is the
only significant instrument for economic policy to act anti-cyclically, that is provide for an efficient
management of strong demand pressures. In the periods of strong economic growth, as Montenegro
is currently experiencing, this would mean the following of a more restrictive fiscal policy to reduce the
pressures that could result in the economy overheating. Another reason for a prudent and restrictive
fiscal policy is the exposure and vulnerability of the Montenegrin economy to external shocks and
global economic trends. Recent developments on the US housing market (the sub-prime crisis) have
led to multiple adverse effects on the global financial market, followed by economic slowdown and
even entering into recession. Upsurges in global oil prices, inflationary trends in the Euro area, and
higher electricity and food prices in Europe are potential factors of instability on the Montenegrin
market. The inevitability of economic cycles and slowdown at certain times indicate the requirement to
create the conditions for a long-term economic output regardless of certain pro-cyclic decisions.
Therefore, in addition to creating more space for investments, the implementation of taxation reforms
also aims at the establishing of a long-term control over public expenditure in line with the balanced
budget policy.
Large inflow of foreign capital in Montenegro started in mid-2005 and the consequence being a
powerful growth and a large balance of payments deficit, the same experienced other economies in
transition. Therefore, Montenegro's macroeconomic and fiscal framework should be based on the
expected high rates of growth, but also on large foreign trade deficit and larger fiscal surpluses.
Considering the balance of payments deficit increase and the fiscal surplus are expected to be of
intermediate nature, the fiscal policy should be prepared on a gradual decline in revenues (in relation
to GDP) and should not start from the assumed large and permanent fiscal liabilities.
Taking into account the aforesaid, it is necessary to perform ongoing analysis of a medium-term fiscal
sustainability determined by public sector wage policy, the implementation of taxation reforms,
realisation of the capital budget, that is, the defining of responses to great demand for investments in
infrastructure and servicing of domestic debt. The defining of a medium-term fiscal policy objective will
help in the adjustment of the requirements for budgetary funds. The elimination of infrastructural
bottlenecks will require the allocation of growingly large amounts of funds designated for financing
capital investments, primarily in the physical infrastructure, thus also strengthening the country’s
capacity for the implementation of EU standards, which is possible only through a long-term control of
current expenditures. In addition, Montenegro, as a potential candidate for the EU accession, aims at
institutional capacity building, harmonization with EU legislation, development of a civil society, the
improvement of regional and cross-border cooperation, and the preparation for the access to structural

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                                  National Program for Integration


 funds. With a view to accomplishing the aforesaid objectives Montenegro will use the IPA funds in the
 period 2008 – 2013.
 With a view to creating a more transparent and efficient system of public finances, the “organic” Law
 on the Budget and Law on Financing of Local Self-Governments have been amended. In addition, the
 Central Bank of Montenegro passed the measures for curbing credit growth and limiting it to 40% in
 2008. The new insurance regulations are implemented and new regulations governing securities,
 ownership and proprietary rights and the Law on State Property are being drafted. With a view to
 improving the budget management, activities on the budget consolidation continued, involving the
 merging of the existing off-budget funds with the Treasury in 2008. This has not only improved the
 managing of cash and government deposits and rationalised the public finances, but it also increased
 the public finances transparency. In addition to the aforesaid, the strategic framework of public
 finances implies the continuation of the program budget implementation in order to improve the
 effectiveness of use of taxpayers` money. At the same time, the implementation of a medium-term
 fiscal framework should provide for the implementation of the key economic policy objectives.
 The estimates of macroeconomic indicators in the period 2007-2010 show a continuation of a strong
 GDP growth, moderate inflation levels and a decline in total public debt. The public sector reforms
 envisaged in the period 2007-2010 are aimed at reducing the public debt, taxation of citizens and the
 corporate sector, increase of employment and flexible economy guided by a strong corporate sector.


 The estimated public spending by end-2007 and the medium-term framework in the period 2008-2010
 are based on the estimated GDP movements, public spending in the period 2003-2006 and the
 realised public spending in the first three months of 2008. Public spending policy for 2008 and the
 following two fiscal years is based on the main objectives of the economic policy of the Montenegrin
 Governments, the estimated fiscal potential of Montenegro and macroeconomic trends in the
 upcoming period.


Medium-term fiscal framework     2007-2010        2007            2008          2009           2010


Public revenues                                       52.76          52.87         52.43          49.61
Consolidated public spending                          45.74          49.56         50.84          48.23
Deficit/Surplus                                          7.02         3.31          1.59           1.39
Interest                                                 1.10         0.72          0.67           0.62
Primary deficit/surplus                                  8.12         4.03          2.26           2.01
Public debt level                                     29.66          32.31         28.99          25.61
Increase of deposits                                     4.90         5.81          5.31           4.18




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                                     Government of Montenegro



2.2.2. LIBERALISATION OF PRICES AND TRADE
During the previous fifteen years, the Government could establish the prices in many economic areas,
including construction, insurance, higher education and research, publishing (except local
newspapers), the media network, health care and social insurance, banking, and to regulate prices
with a view to fostering agricultural production. It could also intervene so as to respond to price
disturbances or in a case when it was obvious that economic policy objectives cannot be achieved in
any other way but to set up price policy. Regardless of such vast possibilities, the administrative price
control was applied to a limited number of goods and services such as human medicines, oil and oil
derivatives, postal services, and a certain number of utilities services that are controlled by local
authorities (heating, water supply, waste disposal, public transportation, and the like).
The possibility of administrative price control in the aforesaid areas was abolished in February 2006.
Today, prices in Montenegro are market-driven, except for the prices of certain medicines, oil and oil
derivatives and coal.
With regard to setting the maximum prices of medicines, the subject of price control are only the
medicines procured in accordance with the national health insurance scheme. As for oil and oil
derivatives, oil companies are obliged to adhere to the prescribed maximum retail prices. Retail prices
of oil derivatives are based on costs and are adjusted to global oil prices, exchange rates, import
duties, taxes and fees, distribution costs, handling and warehousing, operational margins, and so on.
The price control of coal is applied only to the domestically quarried coal delivered to the Thermal
Power Plant Pljevlja, but the complete deregulation of the coal prices will be considered after the
expiration of the five-year period during which the regulated prices shall be applied. Coal designated
for other beneficiaries or purposes is not the subject of price control. The Thermal Power Plant Pljevlja
is authorized to acquire imported coal at market prices, but in practise, the plant bases its need on the
domestic supply. In the field of telecommunication services, the regulatory body authorized for price
control and overall telecommunication services is the Agency for Telecommunications. Agricultural
products are not the subject of the administrative price control.
With regard to cigarettes and other tobacco products, importers and wholesalers determine their
prices and report them to the administrative authorities.

2.2.3. FINANCIAL SECTOR
The Montenegrin financial market consists of the banking sector (11 banks), the capital market (8
investment funds, 29 stock exchange dealers, 5 of which are brokerage-dealers organizations and
over 300 companies that are listed or traded on a free market), the insurance sector (7 insurance
companies), as well as leasing companies (4 leasing companies and 3 banks that provide leasing
services). The Law on Voluntary Pension Funds has been adopted, thus, we can speak about the
initiation of a new financial market segment.
The banking sector dominates other segments the Montenegrin financial system, both regarding its
development and its contribution to economic growth. The financial intermediation ratio for the banking
system, i.e. its ongoing improvement is one of the indicators of the sector’s contribution to economic
growth: banks` assets/GDP ratio amounted to 26.2% in 2002, 72.7% in 2006, and 117% at end-
September 2007. In addition, savings in banks is the prevailing form of savings regardless of the
development of non-banking financial institutions, thus representing the main domestic source of
financing. The savings (household deposits) to GDP ratio rose from 1.7% in 2002 to 59% at end-
September 2007.
Micro lending also gains on importance. In the period 2002-2006 there were only two micro-credit
financial institutions (MFI), as opposed to the current five MFIs. The MFIs assets/GDP ratio also
improved, thus increasing from 0.8% at end-2003 to 2.3% at end-September 2007.
The development of all financial market segments, along with private property and entrepreneurship,
represents the basis of the transition concept in Montenegro, following the idea of a free market with
the minimum state interventions. The development of the financial market in Montenegro is based on
mutual competition, with the aim to prevent the occurrence of centralization and monopolization in this

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                                      National Program for Integration


field. The key characteristics of development of some financial market segments are presented further
on in this chapter.
Banking sector
A reform of the banking sector represents an important element of the transition process of a country.
This is because a developed banking system, with a developed banking supervision, represents a
precondition for the development of overall economy and can trigger numerous other areas of
restructuring. A sound and stable banking sector secures the trust necessary for domestic and foreign
capital investments. A quality banking sector also secures the initial capital for the performance of
business activities, especially for small and medium enterprises that act as generators of economic
growth.


The reform of the banking sector can be assessed as highly satisfactory, because it has resulted in a
modern banking system that is the driving force of economic development of the entire Montenegro.
The banking system is characterized by a diversification and a continuous increase in the scope of
activities. Today’s banking system of Montenegro is predominated by private property (98% of the
banking system capital)4, primarily foreign property (75% of the banking system capital). There is an
ongoing increase in deposits, savings and total assets of banks. At the end of the third quarter of
2007, savings was over twenty times higher and banks` assets almost ten times higher than at
end-2000.
There are currently 11 banks in Montenegro which were licensed by the Central Bank of Montenegro.
The main activities of the banks are lending and deposit-taking.


Pursuant to the Law on Banks, banks in Montenegro may perform investment banking operations.
Some banks started with brokerage and custody operations (four banks obtained licenses and two
banks have applied for the custody license). In addition, two banks were licensed to perform
investment banker operations.
One bank issued bonds in the second year half of 2007, this representing a new form of acquiring
funds. The reason why the banks did not engage in this form of financing before is that in addition to
the main sources for their lending activity, they had been mostly oriented towards foreign borrowing,
that is, withdrawing credit lines from their parent banks5.
Greater exposure of the banks to risks resulted in the adoption of adequate by-laws aimed at providing
a greater security in the banks` operations, primarily by reducing credit risk having in mind the
increased lending activities of the banks induced by the increase in loan demand in the last few years.
In addition, the banks are obliged to keep the reserve requirements in accordance with the Decision
on Bank Reserve Requirements to be Held with the Central Bank of Montenegro.6.


In 2005, the Regulatory Credit Bureau started operating within the Central Bank of Montenegro, with
the aim to improve the monitoring and assessment of credit risk in banks, monitoring of the average
weighted lending interest rate, a quality control of market and operational risks. After the signing of the
agreement between the CBM, banks and micro-credit financial institutions (MFIs), the Regulatory
Credit Bureau data have been available to banks and MFIs as of the beginning of 2008, this with a


4
 There is an ongoing process of sale of minority packages of state-owned shares in some banks. After the end of
this process, state ownership in the banks will only be indirect, through the share in ownership by some state
companies, such as EPCG.
5
    These were banks with majority foreign capital.
6
    “Official Gazette of the Republic of Montenegro”, no. 14/06 and “Official Gazette of Montenegro”, no. 09/07,
    the latter being implemented as of January 2008

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                                     Government of Montenegro


view to diminishing credit risk. Also, The Deposit Protection Fund also started operating and all banks
are its members.
The main characteristics of the Montenegrin banking sector in Q I 2008 are as follows:
-    Banks’ total assets amounted to EUR 3,124.5 million as of 31/03/08. They increased at the rate
     of 5% over the quarter, or at the growth rate of 80.2% in relation to the same three-month period
     of 2007.
-    Banks’ total capital at the first quarter-end of 2008 amounted to EUR 258.9million. The capital
     growth rate in the one-year period amounted to 43.3%. The structure of total capital was the
     following: the share of foreign capital was 75%; private capital 23%, while the state share was
     2%. Three banks are majority domestically private-owned, while other eight banks are majority (3
     banks) or 100% (5 banks) foreign owned. Banks with majority foreign capital control 80% of the
     banking market in Montenegro.
-    Total loans disbursed by banks in the three-month period of 2008 amounted to EUR 2,467.9
     million, which represents growth at the rate of 9.8% in the reporting quarter and the 114.1% year-
     on-year increase. In the structure of banks` credit portfolio, long-term loans account for 72.8% of
     total loans disbursed. The main loan beneficiaries are privately-owned companies (58%) and
     natural persons (36.2%). Loans granted to the household sector amounted to EUR 894.5 million
     (36%) and this sector is simultaneously the most significant net lender in the system to the
     amount of EUR 166.6 million. The trade sector was also a significant loan beneficiary (26%)
-    Total banks’ deposits amounted to EUR 2,140 million as of 31/03/08. They rose at the rate of
     2.3% in 2008 and 64.7 % in relation to the same nine-month period of the previous year. The
     most significant depositors of banks were natural persons with 49.6% and private companies with
     28.3%. Of total deposits in the system, 41.8% were demand deposits. The largest concentration
     of deposits was with the household, trade, finance and administration sectors (67% of total
     deposits). Deposits by three banks accounted for 74% of total deposits.
-    Weighted average lending interest rates continued declining during 2007. At end-2007, the
     weighted average nominal interest rate and the corresponding effective interest rate amounted to
     8.34% and 9.09%, respectively, thus recording declines of 0.72 and 0.85 percentage points in
     relation end-2006. Weighted average nominal and effective interest rates on loans granted to
     legal persons amounted to 7.69% and 8.43%, respectively (the respective declines being 0.52
     and 0.58 percentage points), whereas the same rates for natural persons and employees
     amounted to 9.68% and 10.44% and 6.84% and 7.01%, respectively.
     At the end of Q I 2008, the weighted average nominal interest rate and the corresponding
     effective interest rate on all disbursed loans amounted to 9.16% and 8.38%, respectively.
At the aggregate level, return on average assets (ROA) amounted to 0.23% and the return on average
equity (ROE) amounted to 2.63% at the end of the first quarter of 2008.
Capital market
The same as in many other countries in transition, the Montenegrin capital market was the financial
market segment that has undergone the most intensive development. After the Mass Voucher
Privatisation (MVP), market capitalisation increase no less than 515 times. Today, market
capitalisation amounts to over EUR 5.5 billion and some 240% of the estimated GDP, while the
turnover on the Montenegrin stock exchanges to GDP ratio reached the level of 28.72% by mid-
October 2007. The ratio of the turnover on stock exchanges and market capitalization is taken as the
measure of liquidity of the Montenegrin capital market, and it equals to 11.31%. This means that
11.31% of the total capital entering the market capitalization has changed its owner from the beginning
of the year until 19 October 2007. This results in the conclusion that the liquidity of the capital market
in Montenegro is satisfactory.


Previous operations on the capital market institutions showed that the regulations and institutions have
been established in accordance with the market needs and that the systems and components operate
at the satisfactory level and represent a good basis for further development of the securities market.

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                                    National Program for Integration


The regulatory and supervisory body of the capital market is the Securities and Exchange Commission
of Montenegro.The total volume of stock exchange trading with securities in the period December
2001 -September 2007 amounted to EUR 1.331 million, and it increased from a mere EUR 10.8
million EUR in 2001 to EUR 653 million in the first ten months of 2007. This increase was followed by
a significant and continuous growth of the following:

    -   Price of securities on the market: after the Mass Voucher Privatization in March 2002, total
        market capitalization amounted to EUR 10.7 million, while in September 2007 it was 5.5 billion
        EUR. Such a growth is partly an expected consequence of the initially low prices immediately
        after the MVP when most people just wanted to sell their shares when presented with such an
        opportunity, but also due to the growing interest in investing in Montenegro.
    -   Number of trading participants: from 2001 until the end of September 2007, 448,197
        transactions were performed on the capital market, but their number increased from 909 in
        2001 to 182,100 in the first nine months of 2007. The Montenegrin capital market is
        characterized by a very high participation of the citizens in the capital market.


Foreign investors are largely involved in transactions on the Montenegrin capital market. Some EUR
350 million of foreign capital has been invested in Montenegro in the form of portfolio investments, that
is, the purchase of securities through the capital market. This represents nearly 30% of total money
invested so far in the purchase of shares and bonds on the stock exchanges, not taking into account
the state revenues from privatization. New capital invested in the Montenegrin enterprises and banks
in the form of foreign direct investments is over EUR 321 million. Approximately EUR 130 million of the
new capital is invested in the purchase of new issues of shares of enterprises and banks. The
additional EUR191 million of the new capital (earned profit, undistributed reserves) have been
reinvested and distributed to the owners in the form of shares (reinvested capital that was not spent).
Insurance
The Montenegrin insurance market has been on an uptrend in recent years. In the period 2002–2006,
when there were 6 insurance companies operating in the insurance market, and one reinsurance
company, the total value of the gross premium has almost doubled, that is it grew from EUR 22.9
million to EUR 40.4 million, which represents 0.02% of GDP7, whereas 51.4% relates to the mandatory
insurances 27.2% to property insurance, 16.9% to insurance against accidents, and 4.5% to life
insurance. Regardless of such a strong growth, the general assessment remains that the insurance
market is characterized by a high share of mandatory insurances in total premiums, which is
mandatory according to the law, as well as the underdevelopment of some forms of insurance, such
as life insurance, then property insurance, voluntary health insurance, and the like.
Received gross premiums amounted to EUR 40.4 million in 2006, which is over 20% more than in the
previous year and almost twofold more than in 2002. In the structure of paid premiums, over half of the
amount was mandatory vehicle insurance, followed by some 25% of property insurance premiums.
Life insurance in Montenegro is a rather new product as in other transitional countries, but while in
2002 it was almost totally absent from the market, in 2006 life insurance premiums already amounted
to EUR 1.8 million.


If we look at the insurance market concentration, as much as 73.9% of all premiums relates to Lovćen
Insurance8, 21.3% to Montenegro insurance, and the rest to Swiss, Zepter and Grawe insurance
companies.



7
    GDP in 2006 amounted to EUR 2,003.60 million
8
 In the previous period, the state was the majority owner of Lovćen Insurance, and now the company's majority
shares are owned by Triglav, which directly and together with the connected parties owns over 50% of shares.

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                                      Government of Montenegro


The Montenegrin insurance industry is mostly foreign-owned. Grawe and Zepter insurance companies
are 100% owned by foreigners, and the share of foreign capital in Lovćen Insurance is 50.54%, in
Montenegro Insurance 39.39% and in Swiss Insurance 27.18%. Private ownership dominates the
capital structure of the companies, while the state owns shares in two insurance companies – Lovćen
41.14% and Swiss insurance 0.4158%. The insurance sector will be fully privatized by the end of the
first half of 2008, through the privatization of the minority packages of shares in Lovćen Insurance AD
and Swiss Insurance AD through the stock exchange sale, in accordance with the applicable
regulations.


The existing interest of new investors and renowned companies to offer insurance services in
Montenegro is a clear beacon that the upcoming period will bring about a dynamic development of this
sector. Moreover, this is a sign that an explicit and predictable legislative framework has been created.
The existing trends, experiences in the region and the announced opening of new companies suggest
that the development of this sector will be further intensified. The increase in business volume and
services and stronger competition will lead to better and more competitive products for the citizens
and the economy and to the elimination of a part of business barriers to this sector
Leasing
Leasing is a form of financial services that has been recently introduced on the Montenegrin financial
market. The first leasing companies appeared in 2006, and the value of their placements in 2007
amounted to some EUR 115.6 million or 5.1% of GDP. Natural and legal persons are offered financial
and operational leasing, whereas the financial leasing is prevalent. There are four dominant leasing
companies on the market, and they are recording a strong increase in their business operations. The
services of financial and operational leasing are provided by Hypo Alpe Adria leasing, S-leasing and
NLB leasing, while Porsche leasing deals with the provision of financial leasing for passenger and
freight vehicles. Hypo Alpe Adria Leasing, NLB leasing, CKB leasing and Opportunity also deal with
real estate leasing. At the same time, an increasing number of banks in Montenegro are providing
leasing services within their scope of operations, thus making this sector ever more competitive. This
should lead to the further improvement of the leasing services and conditions. The purchase of
passenger vehicles is mostly the object of leasing. At the same time, legal persons are mostly the
leasing beneficiaries, which indicate that a substantial portion of leasing funds is directed to industrial
activities.


The previously mentioned changes in the financial market over the past five years undeniably indicate
an accelerated growth of the financial market and its success in transferring funds from net depositors
to net investors. This growth, viewed through increased efficiency and liquidity, has been
accompanied by momentous changes and improvements in the pertinent regulations and control with
the main goal being to ensure stability as the vital link of overall stability of the Montenegrin economy


Soundness of a financial market depends to a large extent on the expectations of the market
participants. The expectations are formed on the basis of signals from the economy, as well as the
changes in the financial sector regulations and in general. This is especially important in a euroised
system because the possibilities to intervene in case of a crisis are minimal. Therefore, it is necessary
to maintain the existing credibility of the regulatory agencies. The tasks for further improvement of the
financial system consist primarily of the following:

-    Further development of the institutional and regulatory framework that will ensure the
     strengthening of market mechanisms in this field, increase in international competitiveness and
     confidence in the financial system.
-    Development of the regulatory mechanism based on transparency, low transaction fees and
     independence of the regulator.


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                                  National Program for Integration


-    Continuous actions to remove and prevent the establishment of new administrative barriers if
     they do not support the protection of ownership rights and undisturbed functioning of the market
     mechanism.
-    Introduction of new instruments and participants in the financial market (private pension funds,
     open investment funds, insurance companies) will contribute to the greater depth of the market,
     ability to choose, and competition between various segments of the financial market.

2.2.4. PRIVATISATION PROCESS
The main objective of privatisation, as defined in the applicable Privatisation Plan, is to increase
competitiveness and efficiency of Montenegrin companies, simultaneously encouraging foreign
investments and entrepreneurship in all areas, increasing employment and improve the living
standard.


The regulatory framework of the privatisation process in Montenegro involves the implementation of
the federal Law on Socially-Owned Capital as of 1989 and the Law on Ownership and Management
Transformation as of 1992, as amended in 1994, and the Economy Privatisation Law as of 1996, as
amended in 1999. The transformation process of enterprises was phased, including the evaluation of
capital (mainly through applying the method of net assets) and the preparation of transformation
programs for each enterprise. The process included the transfer of shares to employees by combining
the distribution of free-of-charge shares and the redemption of shares at discounts. Within the mass
voucher privatisation process, 436,880 citizens of Montenegro have become owners of shares of
companies through a free distribution of vouchers, thus accounting for 27.1% of total equity of
Montenegrin companies. Further privatization process regulated by the Economy Privatisation Law
has been intensified from 1998, when the Privatisation Council was established by the decision of the
Government, having the competences in the field of management, control and ensuring the
implementation of privatisation. The Privatisation Council is responsible to the Government for its
work.


Pursuant to the Economy Privatisation Law, the privatisation in Montenegro is conducted by
combining the following methods: (1) sale of shares, (2) sale of business assets of companies, (3)
issuance of shares to employees of a company, (4) exchange of shares for privatisation vouchers, (5)
subscription of new shares by means of increase in capital, (6) debt-for-shares swap, (7) joint venture
where the company under privatisation invests fixed assets and (8) the combination of the aforesaid
methods.


The privatisation in Montenegro has been implemented primarily through applying the method of sale
of shares and assets by public auction, public tender or by the sale of shares on the stock exchange
pursuant to the annual privatisation plan that is adopted by the Government of Montenegro upon the
proposal of the Privatisation Council. The annual privatisation plan defines the main objectives of
privatisation and other aspects of this process, methods and principles of privatisation of certain
companies in the respective period. The privatisation process in Montenegro has been substantially
accelerated by the adoption of annual privatization plans, particularly regarding the sale of minority
ownership stakes of the State and State Funds on the stock market. The privatization of numerous
small enterprises has been completed due to the efficient implementation and a simplified procedure
based on the annual privatisation plan and the owners’ decisions. The privatisation pace has been
rather accelerated as of 2004 with a successfully completed privatisation in a numerous of small and
medium-sized enterprises.


More than 85% of the state-owned capital has been successfully privatised so far. It should be taken
into consideration that the privatisation of a large number of companies (particular in the domain of
tourism industry) has been partially carried out through different forms of sale of assets that have not

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been registered as a change in the ownership structure, as well as through sale and free distribution of
minority packages of shares. The total financial effect of all privatisations between 1995 and 2007
amounts to EUR 1,542,32million, of which sales prices account for 39.5% and contractual
investments9 for the remaining part. The total amount of contracted investments during the sale of
shares and property through public tenders in the period 1997-2007 amounted to EUR 932.79 million.
Investments in most companies are carried out in line with the pertinent provisions of repurchase
agreements. There is also a continuous upward trend in interest of foreign investors in investments
through the privatization process. The main indicator of such a trend is a relatively larger number of
successfully completed privatisations with higher-quality bids and competition, especially in terms of
renowned foreign investors. New owners come from a number of countries such as Germany,
Hungary, Norway, Belgium, Austria, Greece, Italy, Russia, Japan, France, Slovenia, Switzerland,
Great Britain, the USA, etc.


Privatisations in the telecommunications sector were completed in 2005, with the restructuring process
having been completed before the privatisation process. Privatisation of the banking sector was also
completed mainly in 2005. The sale of the remaining ownership stakes, amounting to approximately
1% in five Montenegrin banks, is under way. The privatisation of large industrial companies
(Aluminium Plant – Podgorica-KAP and Steelworks – Niksic) was completed in whole in 2005 and
2006, with restructuring having been completed before or during privatization. Privatization in the
tourism industry was mainly carried out between 2001 and 2007. Owing to the privatisation of
numerous Montenegrin hotels in the previous period, serious capital investments in tourism industry
are in progress or are expected to be made, resulting in further expansion and renovation of tourism
infrastructure in Montenegro, especially in hotel services. As a result of the performed privatisation in
tourism industry, total obligatory investments into the hotel industry in the next two to four years are
estimated at EUR 140 million.


The main privatisation method in 2007 was public tender. In addition, the privatisation was carried out
through public auction, stock exchange trade, and sale of companies under liquidation. Activities
aimed at the preparation of restructuring strategies and privatisation of complex economic sectors,
particularly Railway company “Zeljeznica Crne Gore” AD Podgorica (joint stock company) and the Port
of Bar (joint stock company) were initiated in 2007. In addition, the preparation plan for restructuring
strategy of the national airline “Montenegro Airlines” doo Podgorica (joint stock company) is being
drafted. The privatization of Adriatic Shipyard AD Bijela (joint stock company) and the company
“Montepranzo-Bokaprodukt” AD Tivat (joint stock company) has been launched with the announced
invitation to tenders in October. The privatisation process of the largest insurance company in
Montenegro, Lovcen Insurance - “Lovcen osiguranje” AD (joint stock company) has been continued by
the sale of shares owned by the State and State Funds on the stock exchange. The preparation of
tenders for the sale of shares of the Institute for physiotherapy medicine, rehabilitation and
rheumatology “Dr Simo Miloševic” A.D. Igalo (joint stock company) and a Public press publishing and
printing company “Pobjeda” AD Podgorica (joint stock company) is being finalized, as are the tenders
for sale of five small hydro-power plants owned by Electric Power Company of Montenegro-EPCG AD
Niksic (joint stock company). The preparation of the tenders for sale of shares in Tobacco Industry –
“Duvanski kombinat” AD Podgorica (joint stock company) is in progress, too.


In the following period, the Privatisation Council will establish separate tender commissions to conduct
the valorisation and create the development concept as a guideline for investments of potential
investors for numerous tourist locations: Buljarica, Jaz and Ada Bojana, Velika Plaza, Valdanos and

9
 The privatisation process has considerably accelerated the dynamics and quality of development of capital market in
Montenegro. Within the privatisation process, the increase in the total value of trade in shares of Montenegrin companies on
stock exchanges has been generated since 2002, from EUR 767,630 in 2002 and EUR 4,407,444 in 2003 to EUR
5,752,630 in 2004, representing the growth of even 749% compared to 2002.

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Ostrvo cvijeca, Kumbor, Trašte and Bigova. Privatisation in this field shall be conducted through the
existing privatisation models as well as through new models (public private partnership – PPP) and by
intensifying communication with potential investors .One of the priorities of the Privatisation Council is
initiating the normative solutions in the field of ownership-proprietary relations which would overcome
many problems related to property, primarily settling the issue of land treatment in privatized
companies.


The privatisation process in Montenegro is in its final stage, as presented in the following table
showing the remaining larger enterprises in which state has the majority stake. Most of the enterprises
of strategic importance for the Montenegrin economy are those in the field of energy, transport,
tourism, etc. Further privatisation of state-owned companies should contribute to achieving better
economic output, increasing competitiveness of the country and allowing the Government to generate
higher revenues that will enhance capital investments and reduce debts. In addition to the privatisation
models, new models of public-private partnership shall be introduced. The total state-owned share in
those enterprises amounts to EUR 1.078 million or 64% of their total nominal value.

                  Remaining larger companies under the majority state ownership
                                                                      State’s share Value of the state
         Name                                      Nominal value
                                                                          in %           share
       "Elektroprivreda CG" AD Niksic                     907.036.354         67.00       607.714.357
       Zeljeznice Crne Gore                               319.533.049         65.00       207.696.482
       "Jadransko brodogradiliste" AD Bijela               31.612.218         62.00        19.599.575
       AD "Plantaze"                                       68.704.284         54.00        37.100.313
       AD Luka Bar                                        133.958.143         54.00        72.337.397
       Duvanski kombinat AD Podgorica                      19.781.558         51.10        10.088.595
       Institut Dr Simo Milošević                          59.240.278         56.00        33.174.556
       HTP Budvanska rivijera                              69.618.231         58.73        40.886.787
       HTP Ulcinjska rivijera                              81.529.344          60.73         49.512.771
       Total capital                                    1.691.013.459          63.76       1.078.110.833
  Source: Agency of Montenegro for Economic Restructuring and Foreign Investments and Montenegro Stock Exchange



2.2.5. ELIMINATION OF OBSTACLES FOR MARKET ENTRY AND EXIT
Entry into force of the Business Organisation Law in 2002 and the establishment of the Central
Registry of the Commercial Court in Podgorica (CRCC) created the legal, institutional and technical
preconditions for a simple and swift procedure for establishment of new business organisations. The
CRCC is a unique and centralised institution for the registration of all business entities in Montenegro
and which, pursuant to the Law, has its own income and budget, but this is not exercised in practice.
Registration fees are relatively low. The registration procedure takes one to two days, and the Law
indicates that an entrepreneur or a business organisation shall be deemed registered if the registry
agent does not issue the registration certificate within four business days, i.e. provided that the agent
has not rejected the registration due to the non-compliance with the law. The entire CRCC database is
available to the public on the web page www.crps.co.yu, and the project of establishing regional
offices in several Montenegrin towns which will be connected to the CRCC in Podgorica via online
Internet connection and thus facilitate the registration of business entities outside the capital city area.
With a view to creating a stimulating business environment and trying to identify and eliminate barriers
to business, the Montenegrin Government has adopted the Program for the Elimination of Barriers to
Entrepreneurial Development in Montenegro. Confirming the fact that the business environment in
Montenegro has improved significantly, this document also indicates the presence of numerous



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constraints arising out of the complex legal and regulatory frameworks that contribute to the amount,
risk and an increase in operating costs.
A particular problem represents the long and demanding administrative procedures for obtaining a
license to run a business as it requires prior obtaining of approvals from numerous bodies and
institutions. The process rules and provisions on costs are prescribed in various legal acts and by-
laws, and the procedures carried out by local and government bodies may take a long time.
The Action Plan for the Implementation of the European Partnership Recommendations envisages the
adoption of the Law on issuing licenses and permits for running a business with a view to simplifying
the procedures for obtaining business licenses. A subsequent analysis of the aforesaid and other
administrative procedures revealed that it is necessary to simplify all administrative procedures at the
system level with regard to the rights, obligations or legal interest of the parties concerned. The plan
for 2008 adopted by the Council for the elimination of business barriers on 19 May 2008 envisages the
selection of the appropriate model for eliminating business barriers to the performance of business
activities (by passing a new law prescribing the issuing of approvals for business or introducing
eliminating barriers provisions in the existing legislation, i.e. amending the Law on General
Administrative Procedures).
Of the total of 178 countries rated by the World Bank and the International Finance Corporation in the
Doing Business 2008 report with regard to the ease of doing business, Montenegro was ranked 81st in
2008, thus deteriorating in comparison with the previous year (76th place), but it should be noted that
this deterioration is primarily due to more accelerated economic growth of other countries in the said
period, so this represents a relative ranking down on the list. The report indicates that there has been
some improvement in certain areas, but this has not been accompanied by sufficient dynamics to rank
up on the World Bank list.
To that end, in the latest World Bank Doing Business 2008 report Montenegro is ranked 19 overall for
Protecting Investors. Pursuant to the Foreign Investment Law, foreign investors enjoy the same legal
status, has the same rights and obligations as local investors. In addition, affiliates of foreign
companies in Montenegro do business in accordance with the relevant provisions set out in
Montenegrin laws. A foreign investor may establish a company on the territory of Montenegro or invest
in a company’s assets in accordance with the same procedures and meeting the same requirements
as applied for the residents.
Montenegro is ranked 98 overall for Starting a Business. The number of required procedure is 15,
while the region average is 8.8. The procedure for starting a business takes 24 days, whereas the
region average is 26.2 days. The costs of the procedure amounts to 6.2% of the gross national income
(GNI) per capita, 11.1% of GNI per capita in the region. With regard to Dealing with Licensing,
Montenegro is ranked 113; the number of required procedures is 19, whereas the regional average is
24, and the procedure duration is 185 days, 251.3 being the regional average.
The key measures for eliminating the identified barriers to, and facilitating the entry of, new
businesses will be directed towards further simplification of the procedures, a reduction of costs and
eliminating the administrative obstacles for business registration (the number of required steps in
order to start a business, the time for procedures to be completed and the necessary costs). To this
end, further improvements will be made in IT equipping in all the relevant bodies and institutions
involved in issuing approvals and permits, and at local levels, the one-counter-for-all system will be
established, thus enabling a faster and more efficient procedure of licensing.
Regarding the requirements for exiting the Montenegrin market, a distinction is made between a
voluntary liquidation of a solvent enterprise, which is regulated in the Business Organisation Law, and
the cessation of existence of a business organisation, which is regulated in the modern Law on
Business Organisation Insolvency that came into force in 2002.
Voluntary liquidation is regulated in accordance with international standards. A decision on a
company’s liquidation is made by at least two thirds of its shareholders and the decision is published
in the Official Gazette, the same as a decision on appointment of the liquidator who has all powers of
a board of directors and does all things necessary for beneficial liquidation of the company.

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With regard to the cessation of existence of an insolvent entity, it incorporates three proceedings:
reorganisation, liquidation and orderly self-liquidation. The role of the court is brought down to the
supervisory and ruling functions, whereas the emphasis on the liquidation proceedings is put on the
administrator and creditors. In practice, reorganisations and liquidation proceedings are regularly
performed, whereas the orderly self-liquidation has not been conducted so far.
The Law on Business Organisation Insolvency simplifies the procedure for a business organisation in
liquidation and shortens the duration of the liquidation proceedings. The liquidation of some
businesses (this means the freeing up of capital trapped in any business) used to last several years,
whereas today it takes 8 to 10 months. A particularly important novelty is that the liquidation
proceeding is now the legally binding method for the collection of creditors` claims and the
reorganisation of an insolvent debtor. According to the World Bank report, Montenegro is ranked 41
overall for Closing Business, which is a 3 positions rise in comparison with 2007.
Further simplifying of closing business requires a speeding up of the liquidation proceedings by
including the proceedings dynamics in the administrator’s report on the causes that have lead to a
debtor’s financial difficulty and specifying that it may not last longer than three to six months. So far,
only a small number of reorganisation proceedings have been initiated before commercial courts,
unlike standard liquidation proceedings. In order for the Law to be properly implemented, further
activities will be directed towards increasing the number of trained and skilled administrators and
giving recommendation for accelerating liquidation proceedings.



2.2.6. ECONOMY-RELATED OWNERSHIP RIGHTS AND THE LEGAL SYSTEM
Property rights relations
Property rights relations in Montenegro have not been comprehensively regulated by law. Currently,
the old Law on Basis of Ownership and Proprietary Relations is still in force (Official Gazette of the
Social Federal Republic of Yugoslavia no. 6/80 and 36/90 and Official Gazette of the Social Republic
of Yugoslavia no. 29/96). Therefore, the proposals of a new Law on Ownership and Proprietary
Relations and a Law on State Property have been prepared.
The crucial legislation for regulating the property rights relations in Montenegro is the Law on legal-
property relations. The newly proposed Law introduces the following novelties:

   a/       It covers all aspects of property law in one place. To wit, the Law also covers issues
   currently regulated in separate laws on condominium property, collateral, mortgage, fiduciary
   transfer of title, and the like, thus allowing for greater consistency and systematisation of language
   of the law and facilitating a comprehensive understanding of the subject and the manner of
   regulation.
   b/       It clearly specifies the subjects, objects, property law principles and the underlying general
   principles (certainty, prohibition of misuse of property rights, limitations to property rights, and the
   like). It legally defines the concepts of property, the social function of property, possibilities and
   manners of limitations to property, and explicitly defines other property rights (servitude, real estate
   encumbrance and pledge, ownership rights of the state, and the like). The Law also regulates the
   issues related to acquiring and termination of the property right arising from legal affairs,
   inheritance, and a government’s decision in the manner and under the conditions set out in the
   Law.
   c/       Separately regulated are the issues of common property rights, co-ownership rights and
   condominium property, as well as the issues related to servitude, personal servitude and rights of
   neighbours. Lien, fiduciary transfer of title and possession actual are also regulated in the Law.
   d/       The Draft Law liberalises the rights of aliens, , yet the final stance on this issue will be
   known after the adoption of the Law in the Parliament.



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     e/      The Law also eliminates from the legal system some quasi-definitions such as the use,
     permanent use and other social property relapses by transforming social ownership rights and
     registering property rights in the name of actual rightful owners.
A proposed Law on State Property will clearly and unambiguously define and determine holders of the
state property title, and private property will be maximally protected. This Law defines the state
property and its running, management and utilisation, relations of the state and local governments,
and the like.
The process of adopting the Law on State Property and the Law on Ownership and Proprietary
Relations is in its final stage. At end-March 2008, the Montenegrin Parliament determined the public
discussions about these laws to be held during a one-month period, and they are expected to be
discussed and adopted by the Parliament in June 2008.
A new Law on State Land Survey and Cadastre was passed in May 2007 (“Official Gazette of the
Republic of Montenegro”, no. 29/07) and it replaced the law that had been in effect from 2000. This
law is in accordance with modern practises in the EU countries thus properly regulating the issues
related to the land survey, cadastre of immovable property and their registration, the cadastre of
interconnections, the land survey maintenance, the cadastre of immovable property and
interconnections, the registry of house numbers, and the like. It also allows the establishment of
geodetic organisations that will perform some activities that are currently performed by the competent
authority.


The Law on Business Organisation Insolvency (“Official Gazette of the Republic of Montenegro”, no.
6/02) is implemented, and it regulates the issues of liquidation proceedings, reorganisation and orderly
self-liquidation of business organisations.
The adoption and implementation of the aforesaid laws will complete the legislative framework and
establish real property-legal relations and all actions and procedures on and related to property of
rightful owners.
The judicial system with regard to economy-related issues
The institutional framework of the judiciary consists of 15 basic courts, two high courts, and two
commercial courts, the Court of Appeal., the Administrative Court and the Supreme Court. The
Administrative Office has been established within the Supreme Court and its responsibilities involve
performing administrative and financial operations for all courts. The State Prosecutor’s office is
exercises by 13 Basic State Prosecutors, two High State Prosecutors, the Chief State Prosecutor and
the Special Prosecutor for the suppression of organised crime. Misdemeanour proceedings are under
the jurisdiction of 17 regional misdemeanour bodies, ministries, public administration and local
government bodies, and the Misdemeanour Council.
The Bar Association of Montenegro is the organisation of attorneys-at-law and is the representative of
interest of advocacy in the judicial system.
The notary service has not been established yet. The appointment of first notaries will take place in
the second year-half 2008.


With a view to strengthening the public confidence in the work of the judicial authorities, the following
will be secured in the forthcoming period: better information of all parties about the role and place of
the judicial authorities in the judicial system through the establishment of various models of
communication between the judicial authorities and the parties, so that the latter are fully informed
about the court proceedings and the possibilities for its ending; the conditions will be created for the
parties in the court cases to communicate their objections and suggestions on an ongoing basis in
order to improve the work of the judiciary and ensure access of the professional and general public to
the court rulings.


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                                    National Program for Integration


In order to secure a more efficient work of the judiciary and a comprehensive and easier access to the
judiciary by the citizens, legal entities, companies, the activities were initiated in 2000 for the creation
of the first Judicial Information System, which should be fully implemented by mid-2008. Its
implementation will speed up the work of the judicial authorities, increase their efficiency, ease access
to the system for the interested parties, bring the precision of analysis and statistics regarding the
work of the judiciary to the highest level, thus enabling a better-quality planning of the future work of
the judiciary and resolving the existing problems.


With a view to educating the staff in the judicial authorities in the future period, it is planned to
strengthen the capacities of the training authorities and establish new ones, if needed, as well as to
strengthen the existing Centre. It is planned to strengthen the cooperation with the European network
for the exchange of information between persons and institutions responsible for the training of judges
and prosecutors (Lisbon network of the Council of Europe), and introduce an adequate transparent
educational procedure.


In order to realize international cooperation, the capacities of the Ministry of Justice and other judicial
institutions will be strengthened regarding the harmonization of our regulations with the EU acquis, as
well as regarding the international legal aid and cooperation with the international legal institutions.


Special attention is given to the activities related to the fight against corruption, terrorism and
organized crime, as the strategic goal of the reform of the judiciary in the period until 2012. To that
end, in the forthcoming period it is planned to sign bilateral agreements, further harmonize the
domestic legislation with international standards, fully depoliticize the bearers of the judicial duties,
promote further the integrity of bearers of the judicial duties, concentrate the responsibilities of the
judicial authorities for the offences of organized crime and corruption, introduce efficient investigative
mechanisms for the fight against corruption and develop mechanisms to confiscate property acquired
through criminal offence.


In June 2007, the Montenegrin Government adopted the Strategy of Reform of the Judiciary in the
period 2007-2012 and the pertinent Action Plan which specifies the deadlines for the implementation
of activities and obligations set out in the Strategy, the measures for their implementation, the
competent authorities, required funding and their sources. The strategic goals to be achieved in the
envisaged five-year period are: independent, autonomous and functional judiciary available to all
persons, fair, effective, efficient, active in encouraging alternative settlement of disputes, ready to offer
timely and quality response to ongoing changes in the society, and the judiciary that is capable and
devoted to the fight against all forms of crime, corruption, money laundering, and trafficking in human
beings and terrorism. Within the Reform of the judicial system more than twenty laws were adopted
(for more details, see chapters 1.1.4 Political criteria and 3.23 Ability to assume obligations from EU
membership).



2.2.7. ACCELERATION OF STRUCTURAL REFORMS
Macroeconomic stability is the necessary, but not the only prerequisite for a sustainable higher growth
of the Montenegrin economy. With a view to ensuring an ongoing stable economic growth, the pace of
the following structural reforms needs to be accelerated:

-    Promotion of inflows of foreign direct investments (FDI); FDI are extremely significant for the
     development of the Montenegrin economy. The comparison with other countries in the region and
     the new EU member states shows that FDI are more important for Montenegro than for most of
     these countries. Montenegro’s aim is to attract FDI to accelerate the development in all areas.

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                                     Government of Montenegro


     Due to its strategic location, natural resources, the lowest profit tax of 9% and qualified labour,
     Montenegro has the potential of increasing the FDI inflow. In 2006, the Government adopted the
     Foreign Direct Investment Incentives Strategy, focusing on the key levers of investment policy,
     targeting foreign investors through the implementation of fiscal, financial and institutional
     incentives, as well as on defining crucial promotional activities. In creating an environment
     conducive to investments, the Government focuses on the following: (I) commitment to a
     sustainable development programme, responsible fiscal policy and creating an environment
     conducive to the operation of foreign investors; (II) further financial market development; (III)
     further development and strengthening of institutions to attract FDI; (IV) harmonisation of the
     labour legislation with EU standards as well as the adoption of new property legislation; (V)
     borrowing from international financial institutions and concession investing for the construction of
     the major infrastructure facilities; (VI) creating a liberalized fiscal system to attract FDI; (VII)
     further strengthening of the banking sector and financial intermediaries; (VIII) adapting the
     structure of employees to the needs of foreign investors; (IX) educational reforms in terms with
     the needs of development sectors in Montenegro. The activities of the Montenegrin Investment
     Promotion Agency (MIPA) should contribute to a further increase in FDI inflow into the country. In
     February 2007, the Foreign Investor Council was established and it will play an active role in the
     investment policy-making.

-    The completion of the privatisation process; So far, Montenegro has privatised some 85% of
     the state-owned capital. Still, the continuation of privatisation, primarily in the energy and
     transport sectors, is of vital importance for further increase in competitiveness of the Montenegrin
     economy. Further privatisation of the state-owned enterprises should contribute to a better
     economic performance, strengthening the competitiveness of the country and enabling the
     Government of Montenegro to collect greater revenues in order to improve public services in the
     educational and health care systems, as well as in the achievement of higher level of capital
     investments alongside the continued policy of reducing debts. Apart from the privatisation models
     involving strategic investors, the new public-partnership models are also to be introduced. An
     overall share of state ownership in larger companies bound to be partially or fully privatised in the
     next few years (Electric Power Company of Montenegro - EPCG, Railroads of Montenegro,
     Adriatic Shipyard, Plantaže, Port of Bar, Tobacco Plant Podgorica, Institute Dr. Simo Milošević,
     HTP Budvanska rivijera, HTP, Ulcinjska rivijera) amounts to EUR 1,078 million or 64% of their
     total nominal value. In each of these, the state is currently the majority shareholder.

-    Further improvement of the business environment and an active support to SMEs; A better
     business environment is one of the main highlights of the economic policy in the period 2007–
     2010. The business environment in Montenegro has been greatly improved over the past several
     years. Nevertheless, entrepreneurs are still facing difficulties stemming from complicated legal
     and regulatory framework: complicated and lengthy administrative procedures, poor coordination
     of inspection services, time-consuming and burdensome process of purchasing land and
     transferring property titles, issues concerning property insurance, lack of flexibility in the labour
     market, limited access to finances for SMEs, and a high share of informal economy. Future
     economic policy measures to improve business environment in Montenegro involve primarily the
     elimination of business barriers or their minimisation, the legalisation of informal economy and
     active policy to encourage SME development. The measures envisaged to eliminate business
     barriers refer to the further facilitation of business start-up, simplification of the licensing
     procedure, the simplification of business wind-up procedure, enhanced policies in the area of
     urban construction land, a more efficient process for the transfer of immovable property titles,
     increased professionalism of administration, introduction of online registration and regular update
     of data on the official website of the Central Register of the Commercial Court, and facilitation of
     access to additional sources of finance. As for the active policies to encourage SME
     development, the economic policy measures will address the creation of an environment
     conducive to SME development, strengthening various forms of institutional (non-financial)
     support to SME, strengthening various forms of financial support to SME, and the like. Some

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     measures to further increase the competitiveness of the Montenegrin economy concerning taxes
     and social insurance contributions are also envisaged.

-    Flexicurity of the labour market and reduced role of the state in this field; The employment
     rate has been continuously increasing, while the unemployment rate has been falling down quite
     speedily. This is primarily a result of accelerated economic growth, but also an active
     employment policy that the Government and the Employment Agency have been following for the
     past years. By far the greatest problem of unemployment in Montenegro is the structural
     unemployment seen in the discrepancy between labour supply and demand with regard to certain
     jobs. The Government policy in the area of labour market and human resources stems from the
     EU guidelines and is based on the National Employment Strategy 2007–2008 and the
     Employment Programme for 2007. Greater flexibility of the labour market is sought, as well as
     increased security, i.e. flexicurity. The state will gradually step away from the labour market, and
     this process will be supported by the new Labour Law, already in the pipeline for adoption which
     is expected by the end of 2007, as well as the establishment of a tripartite Social Council. On one
     hand, the Labour Law will enable greater freedom to employers in negotiating the employment
     relations and greater flexibility of the labour market in general, while, on the other hand, it will
     facilitate the loss of security for employees by better provision of unemployment benefits and
     effective assistance in seeking new employment. The Social Council will greatly enhance the
     social dialogue and resolve essential issues with equal participation of the social partners. The
     National Employment Strategy has identified the three main priorities for the labour market and
     employment: (i) increased employment and reduced unemployment through measures to
     stimulate employers to open new jobs, measures to reduce long-term unemployment and the
     unemployment among the young, measures to encourage entrepreneurship, prolong the years of
     service, strengthen labour market institutions and encourage partnerships for employment; (ii)
     increased productivity and labour quality through measures directed towards enhancing labour
     quality and sustainability of jobs, (iii) strengthening social cohesion through measures to
     enhance/promote employment of women, prevent social exclusion, and reduce poverty in the
     northern region of Montenegro.

-    Fostering tourism growth as one of the most prosperous industries of the Montenegrin
     economy; Tourism is one of the most important and most thriving branches of the Montenegrin
     economy. Its importance is expected only to increase in future. Tourism has traditionally enjoyed
     the Government support, increasing considerably in the past several years. Such approach of the
     Government is evidenced in the relevant strategic and economic policy documents, such as the
     Master Plan - Strategy for Tourism Development until 2020. The main goal of the Master Plan is
     to enhance competitiveness of the tourism industry through diversification and substantial
     upgrading of the tourism product quality. Economic policy measures for tourism development are
     focused on the increase of foreign direct investments in tourism for the construction of the
     infrastructure essential for tourism development (the coastal region water supply project,
     transportation infrastructure projects essential for tourism development), qualified staff
     development as defined in the Strategy for Human Resources Development in Tourism in
     Montenegro, diversification of Montenegrin tourism products and markets, i.e. destinations, and
     establishing closer cooperation between local authorities, the private sector and educational
     institutions.

    Further strengthening of the financial sector stability; Shaken by the recent disturbances in
    international financial markets, the external financial environment has deteriorated. The Central
    Bank responded to this challenge, primarily to the challenge of credit growth in Montenegro, by
    restricting the reserve requirement ratio and some other measures aimed to improve banking
    control. The Government will continue to support the measures aimed at strengthening the
    banking supervision. This is particularly important due to greater bank exposure to the situation in
    the real estates and capital markets. To that end, the adoption of the new Law on Banks to secure

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     the application of best international practices is seen as particularly significant. In addition,
     strengthening the supervision of other segments of the financial market will continue, primarily
     through the implementation of the new Law on Insurance, the adoption of all relevant by-laws and
     strengthening capacities of the Insurance Supervision Agency.

     Educational and Social Security Systems Reforms; Over the past period, substantial reforms in
     the educational and social security systems have been carried out. The implementation of the new
     legislative framework in line with the educational reform strategy resulted in the introduction of new
     curricula in elementary schools, as well as increased competition in higher education with the
     involvement of the private sector. In addition, substantial investments in new equipment and
     school buildings should create the preconditions for accelerated modernisation of this sector. In
     the forthcoming period, the possibilities for more market allocation of resources into this field
     should be the next stage of the educational reform. The social security system has been
     consolidated. The parameter reform of the state pension fund was undertaken in order to mitigate
     the consequences of the longstanding deficit, and the conditions were created for the introduction
     of voluntary pension funds. An appropriate demographic analysis should be undertaken to
     establish the possibilities for the introduction of the so-called Second pillar. The health care system
     is among the most delicate ones and its reform should be introduced with great caution. It is
     obvious that the appropriations for medical services at the level of the economy considerably
     exceed the public consumption in this field. This sensitive sector should be fully consolidated
     through continued reforms, downsizing of the staff and the introduction of the voluntary health
     insurance. The system of unemployment insurance is being reformed in line with international
     standards and the Government’s commitment to active labour market policies by offering retraining
     and additional training programmes. At the same time, the lack of labour force is becoming one of
     the key challenges for Montenegro; thus, one of the tasks is to define the conditions for employing
     foreigners, as based on the principles of equality and openness.

     Efficient spatial and environmental planning as the key to a sustainable high-end tourism
     development; Considerable tourism potentials of Montenegro are accompanied by ever
     increasing environmental pressures, in particular along the coastline. Preserving the beauties of
     the natural environment and attract high-end tourism, but simultaneously creating the space for
     diversified economic development, is one of the key challenges for long-term sustainable
     development of Montenegro. The Government is making progresses in harmonising the Law on
     Environmental Protection with EU standards and legislation, and it has adopted the Spatial Plan
     for Montenegro by 2020. The new planning documents should create investment opportunities
     following on sustainable development principles and defining concrete opportunities for economic
     development and use of domestic resources. Improved sustainable environmental management
     will in particular require further strengthening of institutional capacities and greater efforts by
     municipalities in the attempts to reach agreements concerning the sites for regional landfills and
     waste water facilities. Considerable investments are required in the prevention of air, water and
     soil pollution by several large industries recognised as environmental hotspots, as well as the
     improvement of the current poor regulation of waste and waste waters and unsustainable
     management of natural resources and the coastal zone. The Government may not remain inactive
     with regard to the global climate changes either. Capacity building for proper response is possible
     through global and regional programmes in which Montenegro has to participate in order to protect
     environment.

     A comprehensive energy sector reform; Continuation of reforms of the energy sector will be of
     particular importance considering the significance of this sector for overall economic activity.
     Montenegro currently imports about 1/3 of the required electricity, which is one of the major
     reasons for the large current account deficit. The power supply in Montenegro, as is the case with
     a large part of the Western Balkans, but Europe in general as well, is to become even more
     difficult if judging by the forecasts for the global energy market. In addition, power generation and

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                               National Program for Integration


transmission in the country has been greatly weakened due to the age of facilities and limited
investments of the state-owned Electric Power Company of Montenegro (EPCG). To provide for an
effective response to these challenges, the Government has adopted the Energy Development
Strategy by 2025 striving to considerably increase investments in the energy sector, including the
opportunity offered to an independent regulatory body to set the margin cost tariffs and minimize
cross-subsidizing among different groups of consumers. The fact that tariffs for individual
consumers and the largest industry consumers will have to be further increased is of particular
importance. Apart from that, the required tariff increase will entail well targeted and properly
financed social security programmes to minimize their impact on the most disadvantaged groups.
The proposal of EPCG restructuring that the Government adopted in November 2007 focuses on
unbundling the generation, transmission, distribution and supply units and this will be performed in
several stages. To this end, the new unbundled units could be connected with strategic partners
through privatisation and public-private partnership models to stimulate new inflows of private
capital. Also, more attention needs to be given to improve energy efficiency in the public and
private sectors to reduce the pressure of increasing power demand, as well as to promote
alternative energy sources.

Reform of the transport sector as a prerequisite for sustainable economic development of
the country; Similar to the energy sector, the transport sector is also characterised by relatively
poor quality infrastructure, primarily owing to limited investments over the last two decades,
inadequate service tariffs reflecting in financial problems of the economic entities in the sector.
Since a good-quality transportation infrastructure and services are necessary prerequisites for
sustainable economic development of Montenegro, including tourism growth and more balanced
economic development of the country’s regions, as well as efficient integration into EU, the
Government will focus its future efforts on a considerable increase of investments in this sector. A
part of the investments should be financed from the budget, or credits, but private sector
investments are also considered through public-private partnerships and concessions. Largest
investment activities are envisaged in the road infrastructure, with the construction/modernisation
of bypasses around a number of Montenegrin towns is planned in the short-term, and in the longer
run the largest share of investments should go to finance the construction of the Adriatic-Ionian
Highway, the Bar – Boljare Highway and the Risan – Žabljak road. As for the railway infrastructure,
major investments are envisaged for the modernisation of the railroad from Bar to the border with
Serbia. Its modernisation is of strategic importance if Montenegro intends to capture the potentials
of the Port of Bar for the transit of goods to other countries. Accelerated investments in transport
infrastructure will be accompanied by legislative changes towards its alignment with European
regulations and by strengthening state institutions authorised for the provision of quality transport
services.

Fostering public-private partnerships and concessions as tools for financing infrastructural
facilities; Taking into account a great need for investments in various segments of infrastructure
and the lack of traditional fiscal resources of the country, i.e. budget resources and state
guaranteed borrowing, the Government will endeavour to investigate the opportunities for
substantial public-private partnerships (PPPs). If implemented properly, PPPs and concessions
may bring about some real advantages and thus they should be encouraged. However, PPPs
need to be entered into within a competitive and transparent framework with properly defined
investment priorities. To that effect, the Government will strengthen the existing legislative
framework for concessions to provide for reasonable risk sharing with investors, create the
conditions for efficient implementation of procedures and encouraging investors to undertake
investment projects and accelerate their implementation.. In addition, independent, comprehensive
and strict feasibility studies need to be developed to ensure cost-effectiveness of investments.

Accelerating development of underdeveloped regions of Montenegro; Although Montenegro
is relatively small in size, there are still considerable differences in the development by the regions.

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                                    Government of Montenegro


   The most developed areas are located in the coastal region and around Podgorica, and the least
   developed are within the northern region. Reducing regional discrepancies is one of the
   Government’s important goals, and the EU accession process provides certain opportunities for
   the achievement of that goal. The EU accession process has the potential of increasing the space
   for the export of specific agricultural products to the EU market and for enhancing the regional
   development by using IPA funds available to Montenegro during the pre-accession period as well
   as through structural funds available for member states after joining the EU. Still, regional
   development is possible only by using the resources the underdeveloped areas abound with by
   attracting foreign direct investments and internal transfers of revenues stimulated by domestic
   investments. Public finance policy should ensure appropriate local level public services, with
   minimum distortions.

   Administrative reforms and strengthening of the rule of law; The adoption of the new
   Constitution and the Stabilisation and Association Process provide a clear framework for overall
   efforts to develop institutions and strengthen the rule of law. Some of the particular challenges
   identified in this respect for Montenegro by the last Progress Report of the European Commission
   are: democratic institution building, comprehensive reforms to harmonise policies and legislation
   and strengthening limited administrative capacities for the enforcement of the legislative and
   regulatory framework. The Government will continue to carry out the Action Plan to Prevent and
   Curb Corruption and Organised Crime via its National Commission. Full implementation of the
   Action Plan will create a good basis for strengthening the rule of law and institutions of
   parliamentary democracy. In this framework, envisaged implementation of a number of research
   studies of causes and manifestations of corruption following internationally recognised
   methodology will constitute the basis for future specific activities. The research should cover the
   area of judiciary and local authorities, as well as the educational and health care systems.



   Public administration reform in the context of EU integrations; The Government of
   Montenegro is aware of the need for modernising public administration and its institutional
   adjustment to EU approximation processes. The adjustment of the public administration is
   established through three institutional mechanisms: (i) the Secretariat for European Integrations
   (SEI) which was established at the proposal of the former Ministry for International Economic
   Relations and European Integration, to enhance EU integration process and its coordination within
   the Government. The Secretariat’s role implies coordination and supervision of the EU integration
   process, legal assistance in the association and accession process, coordination of inter-sectoral
   preparations for negotiations and coordination of negotiations with the EU, coordination of drafting
   key documents pertaining to the process, monitoring the implementation of the agreements with
   the EU and the activities of joint bodies established pursuant to these agreements, cooperation of
   government bodies with EU institutions and bodies, member states, candidate countries and
   prospective candidate countries during the stabilisation and association process, cooperation with
   the bodies of the Montenegrin Parliament, cooperation and direct communication with
   Montenegro’s Mission with the EU and other diplomatic and consular bodies in the association and
   accession process. (ii) EU units established in every ministry in charge of managing and
   coordinating EU-related tasks in the given ministry and in public administration in general. (iii)
   Coordination bodies for the European integration process. The first among these is the European
   Integrations Collegiums, chaired by the Prime Minister, as the supreme political body of the
   Government to manage the EU accession process and deal with political/strategic issues. The
   second is the EU Integration Commission, chaired by Deputy Prime Minister for European
   Integration, the key expert body for horizontal coordination of the accession process, also to deal
   with coordination of the pre-accession assistance. The third coordination body consists of seven
   EU Integration Groups as basic coordination bodies in charge of different areas of the Acquis
   Communautaire, corresponding to the structure of the sub-board for the Stabilisation and
   Association Agreement.

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                                       National Program for Integration



2.3. CAPABILITY TO COPE WITH COMPETITIVE PRESSURE WITHIN THE EU

2.3.1. HUMAN CAPITAL
Employment and labour market
Situation and trends. The increase of economic activities in the recent years positively influenced
labour market trends. In July 2007, the total number of employees was 218,609 or 87.4%10 of the total
economically active population11. Main structural characteristics of the employment are: (i) 76.5% of all
employees are in the services sector, (ii) private sector employs 61.6% of total employees, (iii) 75.9%
are permanently employed and 24.1% are employed for a definite time. In July 2007, the employment
rate reached 51.7% (men 59.8%, women 43.4%). According to the Montenegrin National Employment
Strategy, the projected employment rate growth by 2010 is 2.5% - 3% per year. According to
MONSTAT, average salary without taxes and contributions in Montenegro increased from year 2005,
when it was EUR 213.14 to EUR 338 in August 2007.
The unemployment rate (a percentage of the unemployed in the total number of economically active
population) is constantly and quite rapidly decreasing: from 32.7% (86,163 persons) in 2000, to 30.4%
in 2002, to 26.7% in 2003, to 22.4% in 2004, to 18.5% in 2005, to 14.7% in 2006, to 11.9% (cca
30,900 persons) in 2007. The lowest unemployment rate is in the south region of the country (5.8%),
whereas the highest rate is in the north (17.8%). Montenegrin National Employment Strategy aims to
reduce the unemployment rate to 7%-10% by 2010, while it is expected to drop to 9% or even lower in
year 2008. Having in mind the unemployment trends in the last couple of years, these expectations
are realistic.
    Structural aspects of unemployment are the following: unemployment has been rapidly declining:
    from 40.0% in 2003, to 30.1% in 2004, to 28.4% in 2005, to 20.3% in 2006, compared to 31
    December 2007, when it was 11.9%12. Problem of the youth unemployment rate is not so visible
    and dominant in the overall unemployment structure. Participation of the young in this structure is
    decreasing.
    b/ Female participation in the total unemployment rate is constantly falling: from 56.83%13 in
    2003, to 45.6% in 2006, to 38.7% in July 2007.
    c/ The unemployment structure by age groups: 46.5% of the unemployed belong to up to 30 age
    group - 6.1% of them belong to 15-19 age group, 22.3% belong to 20-24 age group, and 18.1%
    are in the 25-29 age group. Persons aged 30-39 represent 26.3% of the unemployed, whereas
    those over 40 make 27.2%. All this speaks in favour of the fact that the age structure of the
    unemployed is not unfavourable.
    d/ The extent of the long-term unemployment is 55.7%, National Employment Strategy planned a
    decrease of long-term unemployment down to 45% by 2010.
    e/ At present, the biggest problem of unemployment in Montenegro is its structural unemployment
    reflected in the imbalance between the offer and demand of certain vocations. The unemployed
    registered at the Employment Agency have 965 different vocations. For 563 of them there is no
    demand, whereas in case of 331 vocations that the companies are interested in, the Agency does
    not have any candidates with adequate qualifications. Offer equals demand in case of 48
    vocations.
    f/ Montenegrin labour market is characterized by the rising number of non-resident employees.
    65,189 non-residents were employed in Montenegro from 1 January 2007 to 1 October 2007,
    which is an increase of 74.28% compared to the same period a year earlier. On 1 October 2007,

10
      Employment Agency of Montenegro (ZZZCG), Institute for Stretegic Studies and Prognoses (ISSP) research:
      Labour force and employment in Montenegro, Podgorica, 2007
11
      Economically active population in Montenegro amounts to 422,509 persons, activity rate is 59.2%; 62,1% for
      men and 49,2% for women.
12
     Employment Agency: Statistical reports, 2007
13
  Goverment of the Republic of Montenegro: Montenegrin National Employment Strategy 2007-2010, Podgorica,
2007

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                                         Government of Montenegro


     the Employment Agency of Montenegro registered 30,908 unemployed persons. This state is a
     result of several factors, such as the structural imbalance between the offer and the demand, the
     traditional reluctance of domicile population to accept certain vocations, the poor mobility of
     domicile labour force. Certainly, to some extent this is a consequence of the existence of informal
     economy and informal employment within the formal economy. Montenegro is attempting to find
     the right solution to the problem by establishing a quota system. Surely, the formal education
     system should also contribute to the solution of the problem, by establishing stronger connection
     with the labour market demand.
Apart from the economic growth, the decrease of unemployment was significantly and positively
influenced by the active employment policy carried out in the past years by the Government of the
Republic of Montenegro and the Employment Agency. It is implemented through various Programmes
such as: Stimulation of Entrepreneurship and Self-Employment Programme, Trainee Employment
Programme, A Chance for Youth Programme, various public works, and co-financing of existing jobs14
and the like. Aiming to solve the problem of vocation-based structural unemployment, the Employment
Agency carried out numerous vocational trainings, additional training, retraining, etc., for the labour
market and the known employer.
Economic policy objectives and future labour market regulatory measures. As a part of the
process of harmonisation of the employment policy, Montenegro has aligned its strategic documents
with the same documents and recommendations of the EU. Montenegrin employment policy and plans
are based on relevant EU directives for the Member States. Greater flexibility of the labour market and
better safety are strived for. The new Labour Law will also support this end.
Montenegro adopted necessary strategic documents which would be the basis of Government policy
related to the labour market and human resources, that is, the National Employment Strategy
2007-2010, National Employment Action Plan for 2007-2008 and the Employment Programme for
2007. National Employment Action Plan suggests concrete activities related to the labour force offer
and demand; it also contains recommendations and guidelines for human resources development.
Labour relations. Basic elements used to form salaries on the national level are named in the
General Collective Agreement concluded in January 2004. Actual relations are organized within
sectors, branches and individual companies through negotiations between social partners
(associations of syndicates and employers). A series of legislative and regulatory activities are taking
place at present, all of which will contribute to the further development of labour relations in
Montenegro. Generally speaking, employment rigidity in Montenegro can be compared to that in other
countries in the region. New Labour Law that is currently being drafted will, on the one hand, enable
greater flexibility of labour market and, on the other hand, it will relieve the tension caused by the loss
of security by guaranteeing better protection of their unemployment benefits and by providing efficient
help when looking for a new job. The Law on Social Council and the Law on Alternative Labour
Dispute Resolution were passed in 2007 (Official Gazette of Montenegro, no. 16/07). These Laws
shall enhance and significantly improve social dialogue and solve important issues with the equal
participation of social partners. Draft National Qualification Framework and Draft Law on National
Vocational Qualifications were prepared in 2007 and April 2008, respectively, both of which regulate
the conditions, manner and procedure for acquiring national vocational qualifications. Amendments to
the Law on Employment and Work of Foreigners were adopted at the beginning of 2008.
Labour market management foresees three major action priorities:
     a/ Employment increase and unemployment decline. All planned measures and activities
     pertaining to this priority are concentrated both on the demand and the offer on the labour market.
     They are oriented towards the creation of larger number of jobs in the corporate sector and
     towards assisting the unemployed to integrate into labour market. Within this priority, there is the
     following set of goals: (i) encouraging employers to create large number of jobs. Adequate balance
     of flexibility, productivity and security; (ii) fighting long-term unemployment; (iii) fighting youth


14
     The state helps employers keep the existing jobs.

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                                    National Program for Integration


     unemployment; (iv) encouraging entrepreneurship; (v) prolonging working life; (vi) strengthening
     labour market institutions and encouraging partnerships for employment.
     b/ Increasing productivity and work quality. Planned measures and activities aim to improve the
     quality of labour force and job maintaining / sustainability. Goals of this priority: (i) aiding the
     process of further economic restructuring; (ii) improving the skills of labour force; (iii) harmonising
     the offer of the educational system with labour market demands.
     c/ Strengthening the social cohesion. Planned measures and activities within this priority are
     directed towards those categories of society / social groups which face special difficulties when
     entering labour market and therefore require special attention. Goals are as follows: (i) improving /
     promoting female employment; (ii) prevention of social exclusions – positive measures / activities
     for handicapped / vulnerable groups; (iii) poverty prevention in the north of Montenegro.
Education
With only 626,000 inhabitants, vast natural resources and underdeveloped economy, the most
important treasure of Montenegro which strives to become the “society of knowledge”, lies in its
citizens. They are the ones that need to ensure further development of Montenegro and to learn that
only a lifelong education and improving can guarantee a better life. To that end, Montenegro has
defined the key objectives of the education system reform as follows: “New education system must be
compatible with the strategic development commitments and objectives of reforms in Montenegro,
which are all directed towards the development of democratic, economically prosperous and open
society founded on the rule of law, harmonious interethnic coexistence, understanding and tolerance“
("The Book of Changes“, Ministry of Education and Science of the Republic of Montenegro, Podgorica,
2001). Such a defined objective implies simultaneous existence of two levels:
     a/ Level of social objectives: (i) education of citizens as a contribution to the economic
     development (GDP growth, employment, standard of living and the like; (ii) development of
     responsible behaviour in relation to the principles and norms of a civil and democratic society; (iii)
     citizens` readiness for a lifelong learning, in order to adjust to changes on the labour market;
     b/ Level of educational objectives: (i) high pass rate of pupils and students, and high quality of
     acquired knowledge; (ii) increase of the scope of secondary education; (iii) increase of the number
     of pupils and students that would obtain, keep, understand and use acquired knowledge and civil
     values; (iv) satisfied and motivated teachers.
The entire reform process of the education system lies on the basic principles which include system
decentralisation, ensuring equal opportunities, making choices in accordance with individual
capabilities and interests, implementation of the quality assurance system, development of human
resources, lifelong learning, flexibility, realistic and gradual introduction of changes. Montenegro
defined basic tasks related to the education reform which is aimed at human capital development: (i)
improving overall educational level of the population (by increasing the number of persons who
acquired higher education); (ii) establishing the National Qualifications Framework harmonised with
the recommendations of the European Qualification Framework, with the participation of all partners;
(iii) assuring preconditions for the implementation of lifelong education principle, with special emphasis
on adult education and training; (iv) implementation of the model of quality assurance in education; (v)
assuring the education that would support sustainable development; (vi) changing education
programmes to allow acquiring key competencies15; (vii) further development of science, research and
technology; (viii) improving education of individuals with special needs.
 Achievement of these objectives stems from key strategic documents which, at the same time,
represent basic guidelines for the implementation of the education reform – “The Book of Changes”
(2001), “The Strategic Plan of Education Reform for the Period of 2002-2004” (2003), “MEIS - Main
Project on Education Information System of the Republic of Montenegro” (2004), “The Strategic Plan

15
  Communication in the mother tongue, communication in foreign languages, competency in mathematics and
basic competencies in science and technology, digital competency, Learn how to learn, Interpersonal and civil
competencies, Entrepreneurship, Cultural expression).


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                                        Government of Montenegro


of Education Reform for the period of 2005-2009” (2007), but also based on the recommendations
written in key EU documents related to the education system improvement, above all, the Bologna
Declaration and the documents related to the Lisbon process and Copenhagen process.
So far, the education reform process in Montenegro has been oriented towards the following activities:
(i) defining legal framework; (ii) establishing new institutions and advisory bodies which enable system
decentralisation; (iii) improving education programs; (iv) teacher training; (v) manager training; (vi)
writing new textbooks; (vii) upgrading school infrastructure; (viii) providing preconditions for the use of
IT technologies in teaching and learning processes. In the realisation of these processes Montenegro
was guided by the idea of establishing education and training systems that would be flexible enough to
answer all requests imposed by rapid changes. At the same time, Montenegro followed certain
experiences and practises in the EU Member States which guarantee that the country is moving
towards the same mutual goal, while maintaining its differences which reflect Montenegro’s
particularities.


Research and development
In line with the Lisbon Agenda, creation of the knowledge-based society takes an important place both
in strategic and in development-related documents in Montenegro. National Strategy of Sustainable
Development of Montenegro states that the country’s economic development is achieved, among
other things, by stimulating innovations and productivity, enhancing entrepreneurship, reducing brain
drain. It is defined that the priority objective in the field of new technologies is to stimulate research,
development and innovation, with the creation of adequate economic instruments. The Spatial Plan of
the Republic of Montenegro (draft) also emphasizes the importance of the development of intellectual
capital as one of the development priorities. Science is paramount in solving numerous social
problems. Also, there is a strong need for establishing connections between the research community
and the end users of research results.


One of the problems that lie in the way of creating and managing research and development policies
is the lack of necessary data. To that effect, it is essential to perform a reform of the research system
in this area. Statistics should follow indicators according to the Frascati methodology, which would
supply the data comparable at the EU level (ERA indicators): total number of persons with higher
education, their number in relation to the total labour force, percentage of HRST (Human Resources in
Science and Technology) by education and by occupation in the total labour force, HRST
unemployment rate compared to non-HRST unemployment, sectors which employ S&T personnel, as
well as the percentage of S&T personnel in the total labour force by regions.


                 Overview of researchers (masters and doctors) by scientific fields
       Scientific fields                 Number             Number of PhD`s         Total
                                         magistara              nauka
       Natural Sciences -                  94                    98                 192
       Mathematics

       Technical - Technological            152                    167              319
       Biotechnical                          36                    46                82
       Medical                               79                    72               151
       Social and Humanistic                421                    274              695
       Total                                782                    657              1439
       Source: Database of the Ministry of Education and Science, November 2007.



                      State’s allocation of resources for R&D (% GDP) – GBAORD

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                                        National Program for Integration



                       Year                       GDP (mil of EUR)                  RTD (% GDP)

                       2002                             1,301                            0.14
                       2003                             1,433                            0.09
                       2004                             1,535                            0.19
                       2005                             1,664                            0.21
                       2006                             1,759                            0.24
           Source: Estimate of the Ministry of Education and Science; MONSTAT does not produce relevant data using the
           existing methodology

    Institutions responsible for the implementation of research & development activities and its support are
    the Ministry of Education and Science, Department of Science and Higher Education.
    Ministry of Education and Science, Department of Science and Higher Education provides finances for
    scientific-research activities, on a competitive basis, from budgetary earmarked funds.
    Supporting programmes of the Ministry of Education and Science:
-      National scientific-research projects (for projects related to fundamental, applied and development
       researches)
       Human resources development (grants for MSc and PhD students; supporting participation in
       international conferences)
       International cooperation (bilateral projects and supporting multilateral cooperation projects)
       Mobility programmes for students and researchers
    Scientific Research Council
       Aiming to upgrade scientific research, the Government of the Republic of Montenegro established
       the Council for Scientific Research. The Council analyses the situation and the accomplishments
       achieved in scientific research area and gives professional proposals to the Government.
    Scientific research institutions
    Scientific research is primarily performed in:
       University of Montenegro, that is, in faculties and institutions within University (Faculty of Natural
       Sciences and Mathematics, Faculty of Electrical Engineering, Faculty of Mechanical Engineering,
       Faculty of Metallurgy and Technology, Faculty of Civil Engineering, Faculty of Law, Faculty of
       Economics, faculty of Political Sciences, Faculty of Philosophy, Faculty of Medicine, Faculty of
       Marine Studies, Faculty of Tourism and Hotel Management, Institute of Foreign Languages,
       Institute of History, Institute of Marine Biology)
       Montenegrin Academy of Sciences and Arts
       Research institutions such as: Montenegro Seismological Observatory, Geological Survey of
       Montenegro, Centre for Ecotoxicological Research of Montenegro, Hydrological and
       Meteorological Service of Montenegro , Institute of Ferrous Metallurgy
       Several higher education institutions have recently been established in Montenegro. At present
       moment, they are oriented towards the education up to post-graduate studies level, rather than
       being focused on scientific research.
     Main problems related to scientific research in Montenegro:

       Low levels of government financing of scientific research activities
       There are no state development programmes that would more actively include domestic scientific
       research institutions
       After the privatisation of Montenegrin companies, there is still no visible interest of new owners to
       reactivate former scientific research institutes or form new development centres
       Poor status of scientists in a society leads to young people losing interest in practising science

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                                     Government of Montenegro


   Insufficient human resources for scientific work
   Inadequate relationship between mostly academically employed researchers and the corporate
   sector
   Low intensity of researchers` mobility
   Structures that would encourage innovations do not exist
The Scientific Research Council is in the final stage of drafting the Strategy for Scientific Research
that will define ways for the creation of conditions that would facilitate the development of human
resources and mechanisms for transferring research knowledge and results to the industry and
entrepreneurs. This Strategy defines a gradual increase of investments in scientific research in order
to assure meeting the goals of the Lisbon Strategy (3% of GDP for RTD, 2/3 of the corporate sector).
Following the EU research and development trends and priorities, Montenegrin reform of research and
development system shall strive to provide good position for its researchers and sufficient human
capital for performing research and development activities. Drafting of the Strategy is still underway
and is expected to be adopted by mid 2008.
Montenegro acceded to the Seventh framework Programme FP7 on 1 January 2008(coordinated by
the Ministry of Education and Science), whereas the acceding to the Competitiveness and Innovation
Framework Programme (coordinated by the Ministry for Economic Development) was signed in March
2008. These programmes will help Montenegro establish a quality system of research and innovation.
The initial stage assumes education, networking, creation of a support structure, and adjustments of
official Government policies that support research and development.

2.3.2. PHYSICAL CAPITAL
Energy
The current situation in Montenegro’s energy sector is characterized by the following: (i) reform
activities, (ii) the constitutional commitment of Montenegro to being an ecological state, (iii) a
remarkably high import dependence (entire demand for liquid and gaseous fuels and some one third
of electricity demand), (iv) large unused and quality energy potential, especially hydro potential, (v)
great opportunities for the utilization of renewable energy sources, which creates a good position in
trading property rights over carbon monoxide emissions, (vi) dominance of electric power in the
energy balance, (vii) inherited highly energy-intensive industry and consumption concentration by two
large consumers: non-ferrous and ferrous metallurgy and households, (viii) energy inefficiency in the
consumption sector (especially in using electric power for heating) and high energy intensity, (ix)
insufficient exploration of gas and petroleum sources, as well as renewable energy sources, (x) high
amortization of electro-energy infrastructure and the need for its accelerated revitalisation and
technological modernisation, (xi) partly deregulated energy sector, privatised in the part dealing with
procurement and trade of petroleum derivatives, (xii) incomplete legislation with regard to the energy
sector, (xiii) the lack of energy research and technology development funds.

The main problem in Montenegro’s energy sector is extremely high import dependence. In recent
years, there has been an increase in total energy consumption and imports, average rate being at
5.5% and 4.3% annually, respectively. In addition, the consumption and import of petroleum
derivatives has grown (5.6% p. a.), as has the import of electricity (4.3% p.a.). The electric power
deficit will grow in the following years until at least one new large source of electric power in
Montenegro is built.


Energy sector characteristics from the aspect of services and prices levels:
In terms of network energy systems, (including the South East Energy Community Treaty),
Montenegro currently has only the electro-energy system at its disposal, while the gas system is
envisaged for around the year 2020. In the electro-energy sector, the Electric Power Company of
Montenegro (Elektroprivreda Crne Gore - EPCG) is currently the only and still vertically integrated
company, in which the Government has 70% ownership.

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The issue of the service level in the 2003 Energy Law is prescribed in a rather general manner, being
defined at the level of the obligation of energy undertakings and the right of consumers to deliver and
receive, respectively, electric energy in line with the terms and deadlines set out in the “consent to
connection”, i.e. to deliver it in accordance with the applicable technical regulations. Such a definition
only partly covers the technical quality standards, while the issue of commercial quality has been
practically left out. The Energy Regulatory Agency (established in 2004) dealt with this issue and
envisaged the preparation of regulations that would regulate the issues of level and quality of services
for 2008 (as a part of the EU Technical Assistance Programme).
The actual situation regarding the level and quality of services varies in different parts of Montenegro.
The situation in Podgorica and the littoral (except in Budva) is technically tolerable, but that in the
north of the Republic, especially from the aspect of reliability of supply is unsatisfactory, primarily due
to the unreliability of the transmission and distribution network during winter. This is the result of
insufficient investments in network maintenance and development in the last 15 years on the one
hand, and a remarkable increase in consumption (100% in the same period), on the other hand.


The issue of the prices of services. The method of establishing tariffs is also regulated by the
Energy Law, based on the principle of covering expenses in the standard manner, whereby the tariffs
cover operating costs, depreciation and return on investments. Another principle followed is that
expenses are covered by those who make them (thus, consumers at 10 kV pay for the energy, at 35
kV and 40 kV transmission and distribution expenses, but not distribution expenses at 0.4 kV because
they do not make them). Significant problems in establishing tariffs were due to the fact that losses
found (particularly commercial losses) on the distribution network were extremely high (the total of
25% - both technical and commercial losses), and that there was an evident cross-subsidizing of
households at 0.4 kV by industrial and commercial consumers.
The Energy Law transfers the authority of establishing tariffs from the Montenegrin Government to the
Energy Regulatory Agency which, in accordance with the new authority, passed new tariffs in June
2007, formed in line with the new methodology whereby all costs and tariffs for network access and
utilization (for a transmission system operator) are separated from the costs of tariff consumers. The
implementation of the aforesaid tariffs commenced on 1 July 2007. All commitments set out in the Law
could not entirely be carried out during this first regulatory period:
   a/ The tariffs could not entirely cover all the EPCG required costs, but it was done for the most
   part. It can be expected that EPCG will cover the remaining costs from revenues of the Aluminium
   Plant Podgorica (KAP), which pays the energy price higher than that established in the tariff
   system based on the implementation of the aforesaid principles. Since the tariffs regulate elements
   of EPCG operations aiming to improve the system’s functioning, the Energy Regulatory Agency
   determined the level of total losses of electricity at around 20%, which represents a significant
   decrease in comparison with the last few years.
   b/ Not even the cross-subsidizing could be eliminated in this initial establishment of tariffs in
   accordance with the new methodology, primarily because the price difference at 0.4 kV between
   certain categories of consumers was extremely high, even up to 250%. Thus, tariffs for consumers
   at 35 kV and 10 kV were lowered by some 25%, those for industrial and commercial consumers at
   0.4 kV were kept at nearly the same level, and tariffs for households were increased by some 10%
   in comparison with average tariffs in the period January – May 2007.
At its meeting held on 26 July 2007, the Montenegrin Government adopted the Subvention
Programme for the socially most vulnerable groups with the aim of meeting the minimum electricity
and heating needs.


The level of services and prices in the gas sector is mostly determined by the fact that there is no gas
pipeline in Montenegro. LPG is imported in tankers and distributed in small containers, the activity in
which numerous companies are involved. The prices of petroleum products are limited by the
Government’s regulation and they are revised every 15 days in accordance with the global petroleum

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prices movements. As for the level of services in the petroleum sector, recently some obsolete fuel
quality standard issues have been mentioned, but the authorized ministry has been actively working
on passing modern regulations that would define both new fuel quality standards and the quality
control procedure.
The competition issues: cooperation and competition between private and public entities,
network access, interconnection between national networks. The issue of competition in the
electro-energy sector of Montenegro cannot be discussed because there is only one power company
in the country, EPCG, which is the owner of the entire generation, transmission, distribution and
supply capacities. This being the case, we can only talk about, so to speak, external competition in the
field of electricity supply. In the absence of an organized energy market, imported electricity is
obtained via international tenders and as per the Law on Public Procurement procedures, the same
being implemented throughout the world, so the conclusion is that in this segment, competition is at a
satisfactory level. By fulfilling the obligations set out in the Energy Community Treaty on allowing a
free choice of suppliers for all consumers, except for households, the first real supply competition will
be introduced after 1 January 2008 for this consumer segment. In July 2007, the Energy Regulatory
Agency passed a Decision on the electricity market model in Montenegro which served as the basis
for the EPCG`s submission of a Proposal of Market Rules to the Agency for approval.
In accordance with the Energy Law and the Energy Community Treaty, and with a view to market
developing, enabling competition and increasing business efficiency, EPCG has been functionally
unbundled into 4 functional units: Generation, Transmission, Distribution and Supply. On 29
November 2007, the Government passed a decision to commence legal unbundling of EPCG, in line
with national legislation and valid EU regulations.
As for the network access, Montenegro has not faced this problem yet due to the non-existence of
competition in electricity production, i.e. the existence of only one electro-energy company which is a
100% owner of a small number of big (only 3) and small (hydro) electric power plants (7).
With regard to the interconnection with neighbouring networks, there have been no noteworthy
problems, mainly because the existing interconnection lines with neighbouring countries serve
primarily for the power supply of Montenegro’s consumers. Since there are practically only two
electricity importing entities in Montenegro (partly KAP for its own needs and EPCG for all other
consumers) whose mutual relations are regulated in the 2006 Agreement, objective situation prevents
any problems in this field. Until the resynchronization of the region, including Montenegro (2nd UCTE
synchronous zone) with 1st UCTE synchronous zone in 2005, there had been certain problems with
regard to insufficient interconnection capacities in periods of major system overloads, i.e. electricity
import, but that problem does not exist any more. Due to Montenegro’s geographical position there
has been a great demand for electric power transit, so in cases when such a demand exceeds the
possibilities of interconnections, the allocation of capacities is performed through explicit auctions, and
all other data in the SCADA system of the EPCG functional unit Transmission are available online and
in real time for each interconnection.

Competition in the gas sector is rather determined by the fact that there is no gas pipeline in
Montenegro, which simplifies the situation. Liquefied petroleum gas (LPG) is imported in tankers and
distributed in small containers, with numerous firms involved in the process, so it can be said that
competition principles have been accomplished. In the situation where the prices of petroleum
products are limited by the Government’s regulation and revised every 15 days depending on the
global oil prices, the only element that does not allow absolute competition is the fact that the biggest
petroleum trade company Jugopetrol Kotor is the owner of the entire warehousing capacity in
Montenegro. The Government is trying to overcome this by attracting investors that would build new
warehousing capacities.




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Status and efficiency of the regulatory body:
Energy regulation operations in Montenegro are performed by the Energy Regulatory Agency. The
Agency was established in accordance with the Energy Law, which means that its founder is the
Montenegrin Parliament. The Parliament appoints members of the Agency Board, adopts its annual
financial plan, i.e. its budget that is entirely separated from the Government budget. Such a legislative
solution, whereby the Agency is functionally, organisationally, and personally separated from the
Government, provided for the maximum degree of independence of the Agency. With regard to its
efficiency, the Agency has licensed electro-energy and petroleum companies, passed numerous
regulations in the field of electro-energy, adopted a new methodology for the tariff-setting, and it has
recently passed the first electricity tariffs. Therefore, it can be said that the Agency has fulfilled
expectations and justified its existence.
Orientation and impending economic policy measures:
Montenegro’s economic policy with regard to the energy sector in the forthcoming period shall be
within the Energy Development Strategy of Montenegro by 2025 - White Paper (adopted by the
Government on 13 December 2007), the Energy Community Treaty, the Energy Efficiency Strategy of
Montenegro, the Strategy for the Development of Small Hydropower Plants in Montenegro, the “clean
development mechanism” (Montenegro ratified the Kyoto Protocol in March 2007).
Montenegro accepts all obligations set forth in the Energy Community Treaty as the key document for
the implementation of energy reforms and the development of the regional energy market. These
obligations relate to the implementation of Acquis Communautaire to energy, environment,
competition, and renewable energy sources. The Ministry for Economic Development shall prepare
the Action Plan for the implementation of the Energy Development Strategy of Montenegro by 2025,
for the first five-year period (2008 – 2012). The Strategy estimated the total value of investments to
some EUR 2 billion.
The South East Europe Energy Community Treaty (the Treaty) was ratified by the Montenegrin
Parliament in October 2006. Montenegro shall continue with the implementation of regional and
international obligations in the field of energy and with a view to establishing a competitive regional
energy market by participating in the work of the Energy Community. The assumed obligations within
the Treaty are implemented in accordance with the defined plan:
    Continuation of implementation of the Action Plan for electricity (i.e. the implementation of EU
    Directive 2003/54/EU) adopted in November 2006;
    Implementation of the Action Plan for renewable energy sources (i.e. the implementation of EU
    Directives 2001/77/EU and 2003/30/EU) adopted in June 2007;
    Implementation of the primary legislation with regard to the Directive 2003/55/EZ on general rules
    of the internal natural gas market. The Action Plan for gas (i.e. the implementation of EU Directive
    2003/55/EU) has not been prepared because Montenegro currently has no developed gas market.
Montenegro puts a special emphasis on the increase in energy efficiency. The Energy Efficiency
Strategy of Montenegro (adopted in 2005) shall be implemented through the Action Plan for the period
2008 – 2012, as well as through the implementation of annual Action Plans. The Plan sets forth
priority tasks, these being the enactment of a new Law on Energy Efficiency and the establishment of
a special Agency for the promotion of energy efficiency and renewable energy sources. In addition, a
lot of attention will be paid to the harmonisation and development of secondary legislation in
Montenegro with that of the EU, the carrying out of a public campaign, pilot projects, and training of
personnel.
In April 2006, the Strategy for the Development of Small Hydropower Plants in Montenegro was
adopted and an Action Plan for its implementation has been under way. The main regulations in this
field have been adopted. The Energy Development Strategy of Montenegro by 2025 envisages the
construction of small hydropower plants with total installed power of 80 MW by 2025. With a view to
implementing this programme, a tender was launched in November 2007 for concession awards for
watercourse research and for building of small hydropower plants on 43 watercourses in Montenegro.


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                                      Government of Montenegro


Plans for the future period entail the development of the energy infrastructure, the construction and
restoration of the regionally important energy interconnections with neighbouring countries is an
important factor in the development of the regional energy system and interconnection.
Transport and telecommunications
Low level of economic activities in the nineties, and with that also the need for transport, has greatly
been reducing the needs for significant investments in transport infrastructure. The increase of the
intensity of economic activities has raised the issue of the condition of transport infrastructure and the
restrictions which such infrastructure might have in terms of economic development. Therefore, in the
period between 2001 and 2006, with the assistance of the international financial institutions, the funds
were secured for the reconstruction and modernisation of the existing infrastructure, with the total
value of around EUR 135 million. According to the MONSTAT data, the share of transport in the GDP
amounts to about 10.7%.


The Draft Transport Development Strategy of Montenegro in 2006 defined strategic transport
development determinations as follows: (i) the increase of security and safety in the field of transport,
(ii ) the increase of the quality of transport services, (iii) linking of the Montenegrin transport system
with the Trans-European Transport Network (TEN-T), (iv) the development of transport infrastructure
in line with the needs of economic development, the environment protection in designing and
functioning of transport, (v) fair pricing in the area of transport and fair competition among all forms of
transport. The appearance of the document with the basic elements of the Strategy represents the
beginning of a qualitatively new way of looking at transport development, Montenegrin transport
infrastructure in particular.


Road infrastructure and road transport


Current situation and problems. Montenegro has got a dense network of roads totalling to around
7,000 km. The most important ones are trunk roads and regional roads with the total length of 1847
km, 92% of which are asphalt roads, and the rest are local and the uncategorized roads. Out of 5,100
local and uncategorized roads, 50% are asphalt roads. The density of trunk roads and the regional
ones reaches 13 km per 100 km2. Over 66% of regional and trunk roads are older than 25 years. On
trunk roads and the regional ones, there are 312 bridges and 136 tunnels. Only 25% of regional and
trunk roads has got the circulation frequency greater than 3,000 cars per day. Total value of regional
and trunk roads is estimated at about EUR 2 billion.
Road infrastructure in Montenegro is characterized by the problems like the old age of the road
network, unfavourable geographic terrain, exploitation in the way it had not been designed for, bad
maintenance of roads during the past decade, dominant seasonal cycles in transport frequency.
According to the recommendations and practices of the developed countries, the parameters for
securing the means for road maintenance are around 2% of the total value of the road network or
around EUR 8,000 per kilometre, which in case of the road network in Montenegro should be from
EUR 15 to EUR 40 million a year. In Montenegro, during the last 15 years, the investments ranged
between EUR 2.5 and EUR 8 million. As a consequence, there are numerous accumulated problems
in the network.
The sector has been regulated by new reform Laws, which have been harmonised with the EU
legislation. The new Law on Roads was adopted in 2004 (“Official Gazette of the Republic of
Montenegro”, no. 42/04), which precisely regulated the relations among the users of roads and public
authorities, being the owners of the road infrastructure, secured the sources of maintenance financing,
established the model of relations with infrastructure maintenance agents and so on.




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The state of the road network has been recorded, so that for the maintenance of the same, on the
basis of the five-year Regular Maintenance Agreement, EUR 9 million is allocated per year. Beside
regular maintenance, the Transport Administration realises the road network improvement
programmes, i.e. investment and back-maintenance Programme and the Programme for elimination of
critical points in the road network.
The area of road transport is regulated by the new Law on Road Transport from 2005 (“Official
Gazette of the Republic of Montenegro”, no. 45/05), which has been harmonised with the legal
framework and practices of the EU countries. Its implementation has been estimated as a very good
one, and there are positive effects in the raised quality of services, greater number of lines in national
and international passenger transport, the arrival of more modern vehicles, respecting the prescribed
schedules and so on. There are more foreign transporters interested in Montenegro, thus there is a
great number of newly opened international coach lines.
The Transport Administration was established by the Decree on Amendments to the Decree on State
Administration Organization and Operations, which was published in the “Official Gazette of the
Republic of Montenegro”, no. 32/06. The competencies of the Administration are the activities of
development, construction, reconstruction, maintenance, protection, use and management of public
roads, whilst the said activities related to municipal roads are performed by the competent local self-
government bodies.
Future activities. The most significant future activities in the area of roads are related to the prepared
and adopted Programme for eliminating road network bottlenecks (16 bottlenecks), which would
ensure greater transport circulation, especially during the tourist season. The activities will be taking
place in the period between 2007 and 2009. The activities will be intensified on the construction of
already commenced road direction from Risan towards Žabljak, through the drafting of documentation
for certain sections, as well as with the construction of the sections for which there already exists the
prepared design documentation. The entire road Risan – Grahovo – Žabljak will be completed by
end-2010. Total funds for the completion of this road amount to around EUR 50 million.
The activities on the creation of preconditions for the construction of the highway Bar – Boljari and of
the Adriatic-Ionian highway in Montenegro are underway and they will continue. The realisation of the
construction of highways in Montenegro, apart from the strategic importance from the economic and
social point of view, has also got the strategic significance from the viewpoint of the adequate
integration of Montenegro in the region. The realisation of the project of the construction of highways
is divided into three stages: the first stage – drafting of the Feasibility Study for two highways in
Montenegro; the second stage – drafting the Studies on the options of partnership between public and
private sector, and the third stage – announcing the tender for the construction (awarding the
concession or some other arrangement, depending on the outcome of the first two stages). Such a
harmonized dynamics enables the creation of prerequisites and the platform for the Government of
Montenegro to make the decision on the model of financing and construction of highways in
Montenegro in the first half of 2008.
In the field of road transport, bilateral agreements will be concluded on the basis of the CEMT
(European Conference of the Ministers of Transport), which will comprehensively regulate the
transport on bilateral basis. Market conditions for economic operations and fair competition will be
ensured, equal treatment of national and foreign transporters and the prohibition of discrimination of
foreign in relation to national transporters. In the same way, very important activities will be carried out
on the drafting of the road cadastre and a database, as well as on the application of new technology in
road maintenance.
Railway transport
Current situation and problems. The total length of the open tracks is 248.6 km with 79 km station
tracks. The network consists of three directions: international railway Bar – Bijelo Polje, Podgorica –
Tuzi and Podgorica – Nikšić railways. The average permitted speed determined by the condition of the
infrastructure is 68.2 km/h. On 30% of railway length the permitted speeds are under 50 km/h. The
value of railway infrastructure is estimated at about EUR 2.2 billion. Generally speaking, in the area of
infrastructure, the railway system is faced with two basic problems:

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                                      Government of Montenegro


   Maintenance and reconstruction of the railway require significant funds (only the remediation by
   means of which the designed standards would be met on the route Bar - Bijelo Polje would cost
   around €100 million);
   Obsolete devices and equipment for traffic regulation;
On 168 km, the railway line has 106 tunnels, 107 bridges, 9 galleries, 371 culverts, i.e. about 37% of
the line is represented by complicated infrastructural projects. From the maintenance aspect, this
makes it one of the most complicated and most expensive railway lines in Europe. According to the
standards in the region, for the maintenance of lot less complicated railway lines, it is necessary to
provide around 70.000 EUR/km a year. According to this standard, for the regular maintenance of Bar
– Vrbnica line it would be necessary to spend around EUR 11.8 million per year, which has not been
the case so far. In the year 2006, EUR 8.1 million was spent for its maintenance, and in 2007, EUR
8.3 million.
In the area of railway transport, in line with the Law on Railway passed in 2004, the conditions were
met for the restructuring and privatisation of the railroad, as well as the possibility for the appearance
of a greater number of operators. The obligations of the state have been defined regarding the
maintenance of railroad infrastructure in line with the Agreement for the Maintenance of Railroad
Infrastructure amounting to EUR 8.3 million.
The Railway Transport Safety Bill (adopted in December 2007) prescribes the conditions and manner
for safe, timely and smooth operating of railway traffic and the functioning of the railroad system. In the
process of the drafting of the Law, substantive provisions have been transposed from the directives
2004/49/EC, 96/48/EC, 2001/16/EC, 2004/50/EC, 95/18/EC and 2001/14/EC.
Speaking on the investments in infrastructure, the first rehabilitation stage of the Belgrade – Bar line
lasted from 2003 to 2007, amounting to EUR 15 million – loan of the European Investment Bank (EIB).
The process of reconstruction, modernisation and electrification of Podgorica – Nikšić line is
underway. This project has been funded by the Czech Export Bank in the amount of EUR 57 million,
and it is expected to be completed by the end of 2009.
 Future activities. During the year 2008, the Law on Contractual Relations in Railway Transport will be
prepared. This Law will regulate the following: contractual relations and other obligations in the field of
the transport of passengers and goods in railway transport, like the Agreement on Passenger
Transport, Agreement on Freight Transport, mixed-combined transport and transporters’ responsibility.
The completion of legal and institutional framework will be achieved with the passing of appropriate
by-laws, which are being prepared in the corresponding Ministry, and with the strengthening of the
capacities of the Transport Administration – Railway transport sector. The competency of the Sector
spans over the development and administrative activities related to the following: evaluation of criteria
and determining the compensations for the use of infrastructure, supervision over railway transport
regulation, monitoring safety conditions.
The Government of Montenegro adopted Montenegro Railway Restructuring Strategy in September
2007 (the state owns 68.9% of shares), with the proposed so-called disintegration model. Basic
elements of this Programme, which should be implemented during 2008, relate to the separation of
infrastructure from transport, the maintenance of infrastructure according to a special agreement
between the state and the managing agent, the concession arrangement for the facilities along the
railway line, complete separation of passenger and freight transport and their privatisation. Through
the process of finding a private partnership on the basis of joint venture, the prerequisites will be
created for the qualitative improvement of the state of infrastructure and of the transport service level,
the improvement of information-communication system, the increase of safety and the reduction of the
negative impact of railway transport on the environment. This will enable gradual opening, i.e. the
liberalisation of the railway services’ market.
In the coming period, the investment activities will be continued through the second stage of railway
infrastructure rehabilitation, which is planned for the period 2007–2012. In general, projects that would
be funded in the total amount of EUR 52 million have been determined, using the loans of the


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European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB)
and the European Agency for Reconstruction (EAR) grant.
Air transport
Current situation. The international airports in Montenegro are the ones in Podgorica and Tivat, which
were taken over from the JAT ownership during 2003. Both airports were in a rather poor state.
Considerable investments were realised through the first stage of the modernisation and
reconstruction of the airports and the modernisation of the flight control. For these activities the
support was secured from the European Bank for Reconstruction and Development (EBRD) and the
European Investment Bank (EIB) within the REBIS Programme in the amount of around EUR 29
million. There is another airport in Montenegro, in Berane, which has got a favourable geographic
position and for whose development a strategic partner is sought.
The national airline of Montenegro is “Montenegro Airlines”, established in 1994 as a limited liability
company, with the Government of Montenegro as a majority shareholder with 99.8% of shares. The
number of passengers who use the services of “Montenegro Airlines” has been on the constant
increase during the last several years until the year 2006 (the number of transported passengers was
414,090). For the sake of comparison, the number of passengers in 2002 reached 210,684; in 2003,
320,402; in 2004, 371,088 and in 2005, 460,456 transported passengers.
The Government of Montenegro established the Civil Aviation Administration by its Decree as of
August 2006, as well as the Act on Systematization at the end of 2006, thus initiating the process of
shaping Montenegro civil aviation authority. In the meantime, it has become a member of the ICAO,
EUROCONTROL, etc. In line with the intergovernmental agreement, Montenegro and Serbia have
established and incorporated the flight control function by establishing the SMATSA. The reasons for
establishing a joint Flight Control Agency are both economic and technical-technological ones, as well
as the flight control system which ensures high quality performance of this function. Also, a
Programme for qualifying and training of staff for all key positions within civil aviation authority has
been prepared, primarily for the inspection services of the Civil Aviation Administration.
As for the Laws and other regulations which regulate the air transport, there is the Law on Air
Transport and the Law on Obligations and Basic Property Relations in Air Transport.
Future activities. In October 2007, the Parliament of Montenegro ratified the Multilateral Agreement
between the European Community and its Member States and the JIE countries on the establishment
of the Joint European Air Travel Space (ECAA), by means of which Montenegro is obligated to
harmonise its regulations with the EU regulations in this area. The first and most significant step in this
direction will be the passing of the Law on Civil Aviation, the adoption of which was planned by the
end of 2007, while the passing of the majority of by-laws is planned during 2008, where all Directives
and Decrees from the ECAA Agreement, to which Montenegro obligated itself by ratifying it, will be
transposed.
Investments worth around EUR 10 million are underway on both airports, aiming to further improve the
infrastructure. A very important fact is that these means are secured from the airports’ own funds.
Also, the procedure for acquiring the earmarked donation of the Spanish Government intended for the
drafting of the Feasibility Study for raising the standard in the area of safety and security to the highest
level is underway.
In the area of air transport, the activities on enterprise restructuring have been intensified. Pursuant to
the Privatisation Plan of the Government of Montenegro, the Strategy has been prepared for the
restructuring of the national airline – “Montenegro Airlines” Ltd, where the Government is the majority
shareholder with 99.8% of shares. The company share capital increase model has been selected, i.e.
the emission of new shares which would be offered to the market, that is, to the strategic partner. In
such a way, the privatisation process would be initiated and the funds would be secured for the
acquisition of new aircrafts, i.e. the renewal and enlargement of the fleet, more economical transport
performance on high frequency lines, the improvement of the quality of services and their
specialisation on the market.


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                                      Government of Montenegro


The Programme for the restructuring of the public enterprise “Montenegro Airports” is being prepared,
and it will be implemented during 2008. Basic restructuring directions have been defined by the model
of the retention of land and infrastructure in state ownership, infrastructure development through
concession arrangements and the concession, i.e. privatisation of certain functions (aircraft and
passenger servicing, in-flight catering, supply activities, retail sale, catering and hospitality industry,
etc.).
Marine transport
Current situation. The most significant commercial port in Montenegro is the Port of Bar where about
95% of all port activities are carried out in Montenegro. Its capacity is estimated to around 5 million
tons a year. The nominal value of the Port of Bar amounts to EUR 133,958 million, and the state is the
majority shareholder with 54.1% of shares. In the Montenegrin system of sea ports, only this one
possesses appropriate infrastructure and other technological prerequisites which ensure certain
quality level of services in the domain of inter-modality operations. Total capacity of the port economy
of Montenegro amounts to around 2.5 million tons a year. Most of this transport capacity is related to
the Port of Bar (around 2 million tons), which represents a 40% utilization of the designed capacity of
the Port.
Port of Kotor as its main objective has the development of cruiser vessels and mega yachts reception
capacities. The Port of Zelenika and the Port of Risan in Boka Kotorska Bay have both got the role in
reloading limited quantities of general cargo for the needs of immediate hinterland. The potential for
certain increase in reloading activities is possible after the completion of the construction of the roads
Herceg Novi – Trebinje and Risan – Nikšić.
In the Montenegrin Littoral there are a number of infrastructural facilities intended for the development
of nautical tourism. The most significant ones are Bar Marina, Budva Marina, Kalimanj Marina in Tivat
etc. Bar Marina has not yet been fully completed and for its completion and putting into function there
is a need for a strategic partner (current degree of completion is around 65%).
 In Montenegro, there are 5 registered shipping companies (JSC “Barska plovidba” Bar – passenger
and line shipping, Nimont Ltd. Bar, JSC “Crnogorska plovidba” Kotor – line shipping, Pomorski
saobraćaj Kamenari – passenger shipping), which mostly carry out services of line maritime transport
in the Adriatic Sea basin. The vessels belonging to “Nimont” and “Pomorski saobraćaj” sail under the
Montenegrin flag. For many years, Montenegro has had a significant role on the international labour
market and, according to some estimates, it offers around 5,500 seamen to the world market. On the
basis of their wages, the state has got the annual inflow of around USD 45 to 50 million. Considering
the slow growth and development of maritime shipping, it is not possible to expect a more significant
increase of the employment rate of our seamen onboard national fleet vessels.
In the maritime transport sector of the Ministry, the sections of harbour masters of Bar and Kotor are
established, with the aim of creating the efficient institutional framework for the implementation of the
provisions of the Law and by-laws pertaining to the maritime affairs. Maritime Safety Department,
established in 2003, carries out administrative activities, thus ensuring security on sailing routes and
functioning of marine lights; it monitors functioning and the amount of equipment onboard navigable
vessels, organizes search and rescue operations on the sea and the performs monitoring for the
purpose of preventing sea pollution.
Future activities. The Law on Ports, which should be adopted at the beginning of 2008, should
regulate the allocation of functions, responsibilities and rights between state authorities and private
sector on the basis of the principle that port land and infrastructure are owned by the state. The
application of the Law will be enabled through the establishment of a special public body – the Port
Authority, whose main activities will be: providing for management, construction, maintenance,
protection and improvement of ports; supervision over the use of ports by offering port services, as
well as the preparation of the Concession Act.
The Law on Yachts, which was adopted in July 2007, identifies the user-oriented legal framework for
the development of nautical tourism in Montenegro and a favourable environment for the registration,
navigation, stay and renting of yachts in Montenegrin waters. Apart from the stated Laws, the future

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period will see the adoption of a new legal framework, which consists of a set of the following laws:
Law on Sea, Law on Pollution Prevention from Ships, Law on Security and Safety of Navigation and
Law on Marine Navigation.
The restructuring and the privatisation of the Port of Bar is envisaged in accordance with the
Privatisation Plan. The sale of the state’s share in the Port of Bar (state owns 54.1% of shares) will be
carried out by means of a public tender, on the basis of the previously adopted Restructuring
Programme, the drafting of which is underway. The basic goal of the implementation of the Port reform
is to enable a more competitive position on the transport market and to increase attractiveness for the
participation of private sector in operative activities and investments in development projects, all this
through organizational, managerial, functional and ownership transformation.
In the future period, the activities of the Government of Montenegro will be directed towards the
realisation of the investment project aimed at the revitalisation of maritime economy. In that part, the
Ministry has prepared the Study on Economic Justification of Investing into the Acquisition of Vessels
for the JSC “Crnogorska plovidba”. The activities of the Government of the Republic of Montenegro
are aimed at reviving the shipping industry by planning the privatisation model and the development of
private entrepreneurship, as well as by finding strategic partners for the development of line shipping.
Telecommunication and postal transport
Current situation. In recent years, Montenegro has modernized and extended its fixed and mobile
network and made significant initial steps with the purpose of establishing legal and regulatory
framework for the support of the competitive and progressive market of telecommunication services.
The Sector is regulated by the Law on Telecommunications, Law on Postal Services and the Law on
Broadcasting, and the regulatory authorities are the Agency for Telecommunications and Postal
Services, which issues licenses for telecommunication operators, as well as the Broadcasting Agency.
In April 2005, the State sold its majority share in the existing fixed operator “Telekom CG” to the
Hungarian “Matav”, which is owned by “Deutsche Telecom”. This change of ownership has eliminated
the greatest problem regarding the insuring of regulator’s independence from the subjects it regulates,
which facilitates the liberalisation of the sector. The achievements of Montenegro in this respect are
considerable in relation to many other countries with similar or even greater economic development.
Montenegrin market recognizes three 2G/3G mobile telephony operators: ProMonte, T-mobile and
M:tel. The area of mobile telephony is a segment of telecommunications sector with the most dynamic
development. At the end of September 2007, the number of users of mobile telephony in Montenegro
reached 1,015,089 which correspond to the penetration of 163.66%. In relation to the same period last
year, the number of users is 28.29% higher. Out of this number, 847,240 are prepaid users, whilst
there are 167,849 post-paid subscribers. Out of 1,015,089 users of mobile telephony in Montenegro,
ProMonte had 489,823 users, T-mobile 368,607 users, whilst M:tel had 156,659 users. In terms of
percentages, according to the number of users the situation is the following: ProMonte – 48.26%, T-
mobile – 36.31% and M:tel – 15.43%. The penetration in mobile telephony amounts to 121%
In the area of fixed telephony services on the Montenegrin market, until recently there has been only
one operator, T-com. As of recently, these services, based on wireless access, are being offered by
M-tel, which is at the same time a new operator in the field of mobile telephony. The penetration in the
fixed telephony amounts to 27%.
There are five Internet service providers in Montenegro, but this number is expected to increase very
soon, since in October 2007, Montenegro was delegated a new (ccTLD) country code Top Level
Domain ".me“, and the process of selecting a partner for assigning the domain is underway.
Montenegro Post Office is a universal postal operator, which performs its activity over 131 units of
postal network. The realised investments for the year 2006 amounted to EUR 720,134 and were
mostly directed towards the IT equipment, and one part was used to modernise its car pool. The
achieved profit for the year 2006 was 12.1% higher than planned. In 2007, the competition entered the
postal sector market (2 new operators). There has not yet been significant development of competition
in this area.


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                                      Government of Montenegro


When comparing our data with the developed countries, the statistics show that in developing
countries there are mostly up to three mobile telephony operators. In Montenegro, for more than six
months now, three mobile telephony operators have been offering their services, completely equally
participating in the market race. From the latest, fourth Cullen’s report on the condition of
telecommunications, one can see that Montenegro, compared to 10 other countries which have been
observed by Cullen, has got about 1.1% of participation on telecommunications market.
Future activities. The Telecommunications Development Strategy, adopted in June 2006, apart from
the usual sector development guidelines, has set the guidelines which have resulted in the proposal of
the Law on Electronic Communications that is expected to be adopted by the end of the second
quarter of 2008. Montenegro is will harmonise this Law with the electronic communications regulatory
framework (EU directives in 2002) to the largest extent. The new regulatory framework aims at
promoting the arrival of the competition, eliminating the unnecessary regulations, simplifying complex
administrative procedures, extending the internal market and consumer protection.
The drafting of the Strategy of Broadband Access is planned for 2008. The development of this
segment in Montenegro should be accelerated following the model of the EU countries, thus the main
objective of this strategy is to reduce the degree of lagging behind the average degree of the use of
broadband access in the EU countries.
For the year 2008, there is a plan to draft the Postal Activities Development Strategy. Following the
analysis of the current situation, the Strategy will offer guidelines for the introduction of new services
for which the postal network has got comparative advantages and it will define Government’s
commitment with regards to the status of the Montenegro Post Office and its development
perspectives. By restructuring Montenegro Post Office, the basis will be created for the development
and adjustment of business activities of the public postal operator in the conditions of growing
competition, as well as for deregulation and liberalisation of the postal market.

2.3.3. LEVEL OF TRADE INTEGRATION WITH THE EU
The foreign trade deficit, especially the visible trade deficit, has been present over several decades,
stemming from the very nature of Montenegrin economic structure which had been developed for
years as a base of raw materials supplying the entire internal market of the former Yugoslavia. This, in
turn, created an imbalance of total production funds and spending structures, non-diversified and non-
competitive exports and highly dependable imports. The visible trade deficit has most often been
mitigated by the surplus in the service sector.
Reducing the foreign trade deficit will definitely represent one of the greatest challenges for
Montenegro in the following period. With a view to reducing the balance of payments deficit and the
change to its structure, the combination of a restrictive monetary policy, a restrictive fiscal policy, first
of all the public sector wage policy and structural policy, will be implemented with the main objective
being the raising of aggregate supply through an increase in output, reducing production costs,
developing the SME sector, as well as allocating investment flows more efficiently.
According to preliminary MONSTAT data, total visible trade of Montenegro in 2007 amounted to EUR
2,733.1 million, whereby the value of exported and imported goods amounted to EUR 599 million and
EUR 2,134.3 million, respectively. This points to more dynamic trading activities in 2007 in relation to
2006 (EUR 2,110 million). Both 2007 and 2006 are characterised by an accelerated pace of economic
growth and remarkably large FDI and credit inflows for investments purposes which resulted in the
increased import of goods that are not produced in Montenegro or which production is insufficient.
               Montenegro’s visible trade 2005-2007, EUR million
       Year         Export      Import        Total      Trade balance     Export/import coverage (%)
       2005          460.6       974.3       1434.9          - 513.6                   47.3
       2006          627.4      1482.6       2110.0          - 855.2                   42.3
       2007*         599.0      2134.3       2733.3         - 1,535.4                  28.1
Source: MONSTAT

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*Methodological remark: The Central Bank of Montenegro data on the import and export of goods are
in line with the BPM5 methodology (Balance of Payments Manual, Fifth edition, IMF, 1993), whereas
MONSTAT data on the import and export of goods are in line with the EUROSTAT methodology.
Methodological differences imposed an obligation of adjusting the data gathered from the foreign trade
statistics for the needs of the payment balance, thereby causing the discrepancy between the data on
the import and export of goods which are presented in the payment balance table and the data on
visible trade collected by MONSTAT.
Montenegro’s visible trade deficit in 2007 amounted to EUR 1,535.4 million, which is the year-on-year
increase of EUR 680.2 million. This is due to more accelerated imports, that is, very intensive
construction activities resulting from the reconstruction of two airports, investments in the road
infrastructure, and the reconstruction of the existing and the construction of new hotels. On one hand,
this resulted in the hiring of foreign construction companies, but on the other hand in the growing
import of intermediate goods. What is interesting to observe is that the largest import in the last four
years was recorded in July 2007, owing to the intensive tourist season and large imports of water,
food, beverages, consumer goods and energy products, as the consequence of an increase of tourism
revenues and consumption.
The estimates of the goods and services trade balance, as measured by its share in GDP, are as
follows: -33.27% in 2008, -30.89% in 2009 and -26.01 in 2010 (Source: Central Bank of Montenegro).
Regardless of a high degree of trade liberalisation, Montenegro is still insufficiently integrated in the
EU market. Montenegro's export has been increasing, yet its volume and structure are not
satisfactory. Montenegro is commitment to the creation of institutional environment for a diversified
and competitive export sector through ongoing structural reforms and market liberalisation.


                           Visible trade by groups of countries, EUR million

            Total MNE    Visible trade   Share of group      Export     Share of        Import    Share of
              visible    within group     in total MNE                export in total             import in
Year           trade                      visible trade                MNE export                total MNE
                                                                                                   import

                                                     EU 27
 2006        2 110.0      1 063.95          50.42%           390.23      62.19%         673.72    45.44%
 2007        2 733.3      1 284.47          47.00%           353.68      59.04%         930.79    43.61%
                                                     CEFTA
 2006        2 110.0        744.34          35.27%           221.65      35.33%         522.69    35.25%
 2007        2 733.3      1 056.02          38.63%           229.64      38.34%         826.38    38.72%
                                               Other countries
 2006        2 110.0       301.86           14.31%           15.52       2.47%          286.19    19.30%
 2007        2 733.3       392.88           14.37%           15.70       2.62%          377.20    17.67%
       Source: MONSTAT

Total visible trade with the EU amounted to EUR 1,284.47 million or 47% of total Montenegro's visible
trade in 2007. Export and import to EU 27 respectively amounted to EUR 353.68 million and EUR
930.79 million. The share of export to EU 27 in total Montenegro's exports amounted to 59.04%,
whereas the share of imports from EU countries in total Montenegro’s import amounted to 43.61%.
Total visible trade showed the year-on-year increase in 2007 of EUR 220 million.




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                                                Government of Montenegro



                                    Visible trade with EU-27 in 2007, EUR thousand

                                     Share in      EXPORT       Share in   Share in   IMPORT          Share in   Share in
                          Total
                                     total MNE                  total      total                      total      total
                         visible
No.      Country                     trade                      MNE        EU-27                      MNE        EU-27
                          trade
                                                                export     export                     import     import


1     Austria            53743.71       1.97          2025.95       0.34       0.57      51717.76       2.42      5.56

2     Belgium            17956.31       0.66           701.28       0.12       0.20      17255.03       0.81      1.85
3     Bulgaria            7695.01       0.28           447.12       0.07       0.13       7247.89       0.34      0.78
4     Czech Rep.         31439.94       1.15          2895.66       0.48       0.82      28544.28       1.34      3.07
5     Denmark             2399.81       0.09             3.57       0.00       0.00       2396.24       0.11      0.26
6     Estonia              197.47       0.01             0.00       0.00       0.00        197.47       0.01      0.02
7     Finland            12652.98       0.46            26.69       0.00       0.01      12626.29       0.59      1.36
8     France             56452.00       2.07           204.47       0.03       0.06      56247.53       2.64      6.04
9     Greece            148470.67       5.43         73661.47      12.30      20.83      74809.20       3.50      8.04
10    Netherlands        18967.47       0.69          2480.87       0.41       0.70      16486.60       0.77      1.77
11    Ireland             3231.65       0.12           422.35       0.07       0.12       2809.30       0.13      0.30
12    Italy             372519.70       13.63       164253.42      27.42      46.44     208266.28       9.76      22.38
13    Cyprus              1483.19       0.05           943.30       0.16       0.27        539.89       0.03      0.06
14    Latvia                77.52       0.00            71.02       0.01       0.02            6.50     0.00      0.00
15    Lithuania            114.87       0.00            16.35       0.00       0.00         98.52       0.00      0.01
16    Luxembourg           221.78       0.01             2.86       0.00       0.00        218.92       0.01      0.02
17    Hungary            87042.65       3.18         66253.26      11.06      18.73      20789.39       0.97      2.23
18    Malta                 96.05       0.00            81.45       0.01       0.02         14.60       0.00      0.00
19    Germany           222638.18       8.15          9310.61       1.55       2.63     213327.57       9.99      22.92
20    Poland             25208.82       0.92             5.79       0.00       0.00      25203.03       1.18      2.71
21    Portugal             671.91       0.02             5.43       0.00       0.00        666.48       0.03      0.07
22    Romania            14136.55       0.52           140.52       0.02       0.04      13996.03       0.66      1.50
23    Slovakia            4871.93       0.18           188.54       0.03       0.05       4683.39       0.22      0.50
24    Slovenia           98625.99       3.61         26353.92       4.40       7.45      72272.07       3.39      7.76
25    Spain              25153.46       0.92           202.98       0.03       0.06      24950.48       1.17      2.68
26    Sweden             49055.86       1.79           120.06       0.02       0.03      48935.80       2.29      5.26
27    Great Britain      29352.09       1.07          2864.60       0.48       0.81      26487.49       1.24      2.85
      TOTAL EU-27       1284477.5       46.99       353683.54      59.04     100.00     930794.03      43.61     100.00
      TOTAL MNE         2733398.6      100.00       599020.72     100.00                2134377.9       100.00
      Source: MONSTAT




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                                  National Program for Integration



The main export partners of Montenegro are:
-   Italy, with 46.44% of total export to the EU (27.42% of total MNE exports); the main exporting
    products are aluminium and aluminium products, iron, steel and products thereof, wood and
    products thereof, copper and products thereof;
-   Greece, with 20.83% of total export to the EU (12.30% of total MNE exports); the main exporting
    products are aluminium and aluminium products, electrical machinery, equipment and parts
    thereof;
-   Hungary, with 18.73% of total export to the EU (11.06% of total MNE exports); ); the main
    exporting products are aluminium, ores, ash, steel and iron products;
-   Slovenia, with 7.45% of total export to the EU (4.40% of total MNE exports); the main exporting
    products are aluminium and aluminium products, mineral fuels and oils and products thereof,
    copper and products thereof, steel and iron products, wood and products thereof;
-   Germany, with 2.63% of total export to the EU (1.55% of total MNE exports); the main exporting
    products are steel and iron, essential oils, perfumery, cosmetic or toilet preparations, soft and
    alcoholic beverages, wood and products thereof, cacao and products thereof;


The main import partners of Montenegro are:
-   Germany, with 22.92% of total import from the EU (9.99% of total MNE imports); the main
    importing products are vehicles, reactors, boilers, machines and mechanical devices and products
    thereof, electrical machinery, equipment and parts thereof, plastic masses and products thereof,
    pharmaceutical products and iron and steel products;
-   Italy, with 22.38% of total import from the EU (9.76% of total MNE imports); the main importing
    products are mineral fuels and oils and products thereof, reactors, boilers, machines and
    mechanical machinery and parts thereof, vehicles, furniture, linen, mattresses and their bearings,
    iron and steel products, electrical machinery, equipment and parts thereof, plastic masses and
    products thereof, clothes and kits thereof;
-   Greece, with 8.04% of total import from the EU (3.50% of total MNE imports); the main importing
    products are mineral fuels and oils and products thereof, salt, sulphur, soil and stone, lime and
    cement, aluminium and aluminium products, reactors, boilers, machines and mechanical
    machinery and parts thereof, tobacco and products thereof;
-   Slovenia, with 7.76% of total import from the EU (3.39% of total MNE imports); the main importing
    products are reactors, boilers, machines and mechanical machinery and parts thereof, electrical
    machinery, equipment and parts thereof, mineral fuels and oils and products thereof, furniture,
    linen, mattresses and their bearings, pillows, paper and cardboard and products thereof, steel and
    iron products, wood and products thereof, plastic masses and products thereof, and
    pharmaceutical products;
-   France, with 6.04% of total import from the EU (2.64% of total MNE imports); the main importing
    products are vehicles, reactors, boilers, machines and mechanical machinery, essential oils and
    resinoids, essential oils, perfumery, cosmetic or toilet preparations, and various products of
    chemical industry.

2.3.4. COMPANY RESTRUCTURING AND THE SHARE OF SMALL AND MEDIUM SIZED
ENTERPRISES
Company restructuring
Economic development of Montenegro is based on industrial development and industry restructuring
on the one hand, and on the development of small and medium sized enterprises, on the other. In line
with Montenegrin strategic commitments regarding the privatisation, more than 80% of companies
from the industrial sector have been privatised. Most important privatised companies from the metal
industry are Kombinat Aluminijuma Podgorica (Aluminium Plant Podgorica) and Željezara Nikšić
(Steelworks Nikšić – its production makes up for around 50% of country’s total industrial production);
furthermore, there are representatives of the textile industry, leather and footwear industry, production

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                                          Government of Montenegro


of cellulose and paper, wood processing industry. Certain number of already privatised companies still
does not have strategic partners that would provide funds for acquiring new technologies, thus
increasing their profitability and competitiveness which would, in turn, lead to a more dynamic
economic growth and development of Montenegro.
For the past four years, Montenegro has led an active sector policy regarding the implementation of
the Programme for Company Restructuring and Institutions Development Support, adopted by the
Government in June 2003. Main objective of this Programme is to support restructuring and
modernisation, with the aim of creating necessary prerequisites, during the course of the Programme,
for the improvement of all relevant aspects of business operations, strengthening their competitive
capacities and increasing investors` interests in their privatisation, i.e. providing conditions for
successful business operations. In cooperation with the banking sector, the Government has helped to
provide conditions and initial funds needed for company restructuring. The Restructuring Programme
included 40 companies from different business spheres, the funds being allocated only to those
companies that had had comprehensive revitalisation strategies in place. The priority was given to
those subjects that had realistic chances to be privatised promptly and efficiently. Some enterprises
were awarded funds more than once during this period. The funds allocated for the Programme for
Company Restructuring and Institutions Development Support were realised during 2003 – 2006 in the
amount of EUR 5,066,671.
Simultaneously with the Restructuring Programme, a Programme for the Remediation of Forestry and
Wood Processing has been underway, but at a faster rate, considering the enormous significance of
forestry and wood-processing industry; this also includes activities concerning the privatisation of
companies from this sector. The Programme predominantly involved twelve biggest and most
important companies from the wood processing industry with 14 corresponding forest
administrations.16 The Programme insisted on using the institution of liquidation to gain private capital
exclusively, since it represents an economically more rational ownership status. Beside the
aforementioned, the Programme implied the fusion, i.e. a technological unity of operative forestry and
wood processing industry, which has been achieved in seven examples.17 Upon the realisation of the
Programme, the majority of enterprises the Programme included (over 85%) have been privatised and
are successfully operating in real market conditions. The privatisation is remained to be performed in
Žabljak and Rožaje, as well as in the "Pilana“ from Danilovgrad. Revitalisation of these companies
facilitates the development of a large number of small and medium sized private enterprises involved
in semi-final and final wood processing.
In future period of the restructuring process in the processing industry, an emphasis will be put on
speeding up the restructuring process of the remaining enterprises and the creation of strong and self
sustainable subjects, in order to establish more attractive companies and complete the process of
their privatisation, and in case of those companies which have already been privatised, the activities
will be aimed at increasing their sustainability. In conditions of limited accumulation, the basis of future
development should lie, to the largest extent, on the high level of investments in the purchase of new
equipment ands the application of new technologies with the view to increasing the technical –
technological levels of production, this being a factor for the product quality improvement and the
reduction of cost. Their realistic sources might, first of all, be direct foreign investments, especially the
export – oriented ones which would provide for the creation of conditions for a more efficient
development and technological progress, which would support the improved market competitiveness
of domestic suppliers, easier access to the new knowledge and experiences and to modern equipment
and technology. With the view to attract new investments, especially foreign ones, there is a strong

16
     “Pilana” – Danilovgrad, “Javorak” – Nikšić, DIP “Donja Brezna”, DIP “Žabljak”, “Jakić” Corporation – Pljevlja,
     JSC “Špiro Dacić” – Biljelo Polje, KID “Vukman Krušćič” – Mojkovac, “Impregnacija” – Kolašin, “Eksport drvo”
     – Kolašin, “Omorika – komerc” – Berane, JSC “Gornji Ibar” – Rožaje and JSC “Bor” – Plav.
17
     That is, in Rožaje (“Gornji Ibar” and ŠPAD “Rožaje”), Berane (“Omorika komerc” and ŠPAD “Berane” – under
     the name ŠIP “Berane”), Plav (JSC “Bor” Plav and ŠPAD “Plav” – known as ŠIP “Bor” Plav), Mojkovac
     (ŠPAD Mojkovac and “Vukman Kruščić” – under the name ŠPAD “Mojkovac”), Nikšić (“Javorak” and ŠPAD
     “Nikšić”), Plužine (saw-mill “Brezna” and ŠPAD “Plužine”) and Žabljak (ŠPAD “Žabljak” and saw-mill
     “Žabljak”).

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commitment to continue eliminating administrative barriers, to further improve conditions for investing
into Montenegro, and to encourage involvement in investment projects in the region.
Small and medium sized enterprises
The basic condition for the development of any modern economy is the development of small and
medium sized enterprises (SMEs). SMEs stimulate private ownership and entrepreneurial skills.
Researches show that in developed economies over 90% of all business operations are performed by
the SMEs. SMEs employ two-thirds of total labour force of the EU. The EU approximation
presupposes the adjustment of system settings and the improvement of entrepreneurial climate,
private initiative and SME development.


According to MONSTAT and the Health Insurance Fund, there were 11,895 SMEs in Montenegro as
at 21 March 2007(of which 4,813 individual entrepreneurs, 2,983 medium sized enterprises, 2,405
small sized enterprises and 1,695 micro sized enterprises), which is an increase of 9.3% compared to
the 2005 (10,887 of SMEs). The number of employees in SMEs increased from 30,861 in 2002 to
52,476 in 2006, leading, thus, to the increase of share of employees in SMEs in the total employment
from 27.11% in 2002 to 36.1% on 21 March 2007. This is an indicator of dynamic growth of SMEs and
their increasing importance in the Montenegrin economy.


Business environment in Montenegro significantly improved during the last four years, as well as the
conditions for registration and development of SMEs. More than 90 Laws have been adopted, which
are at the greatest scope brought into line with EU standards. The registration process has been
simplified. Amendments to the Law on Personal Income Tax have been adopted, reducing the rate of
personal income tax and introducing additional tax relief for investments. Significant institutional
reforms have been performed in key sectors such as: fiscal system, financial sector, payment
operations, pension system, privatisation, company restructuring etc. Through the “Programme for
legalization of the existing and the creation of new jobs“ the Government has reduced the share of
grey economy in the labour market and formally increased the number of employed persons in
Montenegro by 40,000. It is important to mention that, apart from the increase in the number of
employees, the corresponding personal income tax revenues from newly employed persons have also
risen. Amendments to the Law on Value Added Tax introduced, besides the already existing general
rate of 17%, a reduced rate of 7% for accommodation services and the basic consumer goods. In the
financial sector, the most significant reform was the introduction of the Euro, which resulted in the
stabilisation of inflation.
Through credit support, the Directorate for Development of Small and Medium Sized Enterprises and
commercial banks disburse loans under favourable conditions. Financial support is conceived so as to
improve economic position of SMEs, thus contributing to their faster and well balanced development
(at national, regional and local levels), and to improve their competitiveness and innovative spirit.
Despite the fact that the business environment in Montenegro has significantly improved during the
recent years, entrepreneurs are still facing difficulties stemming from a complicated legal and
regulatory framework, primarily from its application and accurate definition. The key economic policy
measures for elimination of identified barriers in the perspective period are as follows: (i) Further
facilitation of starting a business; (ii) Simplification of closing a business; (iii) Improvement of the
system of licensing; (iv) Improvement of policy in the field of urban construction land; (v) Acceleration
of the process of transfer of real estate; (vi) Increase of professionalism of administration; (vii)
Introduction of on-line registration and regular update of database on the official web site of Central
Registry of Commercial Court; (viii) Creation of conditions for easier access to the additional sources
of financing; (ix) Increasing competitiveness of tax policy; (x) Introduction of the freedom of contract
and greater flexibility on the labour market.




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Montenegro shall continue its activities aimed at supporting the development of entrepreneurship and
the creation of new SMEs that should become the force leading the economic growth. Adoption of the
Strategy for Development of Small and Medium Sized Enterprises for the period 2007–2010 (adopted
in August 2007) created conditions for increasing the number of production and non-commercial
service SMEs, for increasing competitiveness of SMEs and increasing their share in export revenues.
Active policy for stimulating the development of SMS shall be continued:
    a/ Creation of stable and stimulating environment for development of entrepreneurship and
    SMEs;
    b/ Strengthening of institutional support for the development of SMEs. (i) Existing regional and
    local business centres` capacities will be improved and new ones will be created; (ii) Business
    incubators will be established; (iii) a pilot project for the creation of clusters will be prepared,
    aiming to establish high levels of partnership through appropriate forms of promotion, advantages
    of clusters will be promoted, cluster-related knowledge will be increased and the idea of clustering
    will be developed;
    c/ Encouraging export. The realisation of grant schemes that are supporting enterprises will be
    continued through the realisation of actual projects – new product, domestic product, joint products
    and final products;
    d/ Financing SMEs through programmes offering financial support for profitable business
    operations in line with the level of their development and needs of each development stage;
    e/ Improving business knowledge through the continuation of the education programmes; for new
    and existing entrepreneurs special training courses will be organized, as well as management,
    marketing, internationalisation trainings and training on the subject of export;
    f/ Better dissemination of information to the enterprises. Continuous improvement of service
    capacities intended for entrepreneurs and SMEs that wish to participate in the European business
    market.


2.3.5. STATE INFLUENCE ON COMPETITIVENESS
State aid
The Law on Control of State Support and Aid was adopted on 8 May 2007 (Official Gazette of the
Republic of Montenegro, no. 26/07). This Law is harmonised with the following EU regulations: the EU
Treaty, Articles 87–89; 32001R0069 and 3199R0659. The following by-laws pursuant to the Law on
Control of State Support and Aid are currently being drafted and passed: (i) Decree on Further
Criteria, Purpose and Conditions for Awarding State Aid, (ii) Decree on the Manner and Procedure for
Submission and the Contents of Required Documentation for Prior and Subsequent Control of State
Support and Aid, (iii) Regulations on the Contents of Annual Report on State Support and Aid, (iv)
Decision on the Establishment and Composition of the Commission for the Control of State support
and Aid. The above stated regulations will be harmonised with the following EU regulations:
Commission Regulation (70/2001) and Commission Recommendation (2003/361/EC); Community
Framework (2006/C323/01); Commission Communication (2004/C244/02); and Commission
Regulation (1628/2006). Medium-term priority for Montenegro is further harmonisation of national
legislation on state aid with the Acquis Communautaire. The report on awarded state aid in 2003 and
2004 was made in July 2005, and for the years 2005 and 2006 in October 2007. The reports were
prepared following the European Commission recommendations.
According to the data in these reports, the overall state aid in the previous four years did not exceed
3.5% of GDP. In 2003, the state aid amounted to 3.44% of GDP; in 2004 2.64% of GDP, and in 2005
3.47% of GDP. In 2006 there was a decrease in the share of state aid in GDP to 3.39%.
Simultaneously, the structure of state aid was changed towards more horizontal aid, being the less
selective and more efficient aid. Pursuant to the Law on the Control of State Support and Aid (Article
15), the State Aid Control
Report will be prepared following the adoption of by-laws and the establishment of the Commission for
the Control of State Support and Aid.

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The Law on the Control of State Support and Aid envisages the establishment of the Commission for
the Control of State Support and Aid as an independent body to exercise control over the award and
use, approval and supervision of the return of state aid. The Commission will have its chair, nominated
by the Ministry of Finance and 6 members nominated by various ministries, Association of
Municipalities and Employers’ Association. The establishment of the Commission is pending. At
present, the State Aid Unit within the Ministry of Finance is also being established, to perform expert
and administrative tasks for the Commission. Further staff increase and training of the State Aid Unit is
anticipated.
The technical assistance in creating the legal and the institutional framework for state aid is
continuously provided by the EU through numerous projects (CARDS, TAIEX).
Trade policy
Montenegrin strategic aim is the inclusion into the EU system. Strategic positioning within the EU
internal market, as well as within regional and global framework, is crucial not only for the future
prosperity through growth and development, but also for the overall successful EU membership. In
that respect, concrete goals of the foreign economic relations enhancement are: increasing the export
of Montenegrin products, growth of foreign direct investments and harmonisation of Montenegrin trade
and investments flows, primarily with the EU countries and the countries in the region, through
strengthening of international economic cooperation and the adoption and implementation of
international standards. The aims of the development of international economic relations are vitally
related to complex internal economic reforms that should ensure continuous economic growth,
strengthening of the economy’s competitive capacities, as well as overall implementation of
international standards.
Implementation of Montenegrin foreign investment and trade policies are based on the following:
a/      intensification of foreign trade with the focus on the reduction of foreign trade deficit through: (i)
increasing trade with EU Member States and SE European countries (SEE); (ii) implementing trade
policy through a coordinated appearance of Montenegrin exporters on foreign markets;
b/      Increased inflow of foreign direct investments in Montenegro, primarily via "greenfield" and
"joint venture" projects, with emphasis on the following: (i) increasing levels of reinvested profit in
Montenegro, (ii) protecting investors.
Foreign trade policy and export promotion
Foreign trade policy. Foreign trade operations are regulated by the Montenegrin Law on Foreign
Trade. Liberalising the legal framework which regulates foreign trade and economic activities, in a
manner that is consistent with the agreements of the World Trade Organization, the European Union,
and with the generally accepted international practices, represents the best and most efficient manner
of establishing a substantial increase of foreign trade, as well as other economic activities between
Montenegro and other countries. Recent amendments to Laws have produced normative
preconditions for the creation of conditions necessary for better transparency and for the acceleration
of the Montenegrin accession process for becoming a full Member of the WTO and the EU.
Trade, economic activities, contracts, transactions (dealings) and other activities which include
transfer of goods or other material or non-material properties, ownership rights over non-material
property and services between the external economic zone and the territory of the Republic of
Montenegro (“foreign trade operations”) are free. Foreign trade regulations and the Montenegrin policy
are both based on the following regulatory and institutional framework: (i) World Trade Organization, 18
(ii) temporary Agreement on Trade Provisions between Montenegro and the EU, (iii) CEFTA
Agreement came into force, (iv) activities regarding the signing of EFTA have started, (v) free trade


18
     The WTO accession negotiations are in the final stage and it is can be expected for Montenegro to become a WTO
     member by the end of 2008; The Bilateral agreement on Montenegro`s concessions for EU goods and services was
     signed on 15 April 2008, as part of Montenegro accession to the WTO.

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Agreement negotiations with Turkey are underway, signing is expected by the end of 2008, (vi)
Agreement on free trade with Russia has already been put to use (SCG from 2000).


Export promotion. Since Montenegro still has not got a competitive, diversified and developed
exports sector, it is necessary to intensify efforts and activities that would encourage the
aforementioned values, in order for the Montenegrin products to be placed on the international market.
With active participation and partnership between the exporters and the representatives of
international development organizations, in December 2005, the Government adopted the Strategy for
Export Promotion. The Strategy is a document that the state and private sectors used in order to join
their resources, energy and capabilities. Basic objectives of the Strategy are: (i) ensuring stable
sustainable long-term GDP growth through increase of export, (ii) decrease in the existing trade
balance deficit through export increase / stimulation, (iii) decrease in trade balance deficit through
substitution of import, (iv) creation of competitive export-oriented products, (v) affirmation of
comparative advantages.
Based on the Strategy and with a view to fully implementing it, a Programme for encouraging
competitiveness and export of Montenegrin economy is being implemented by the Directorate for
Development of Small and Medium Sized Enterprises based on the Action Plan. The focused part of
the Strategy, i.e. a direct support to the exporters is being realised according to the plan. At the macro
level, measures for export promotion, mainly fiscal and financial promotion measures, as well as
measures pertaining to the adoption of legal framework and the creation of institutions, are being
satisfyingly implemented. A lot has been done regarding the reduction of administrative barriers, but
evidently they still do exist and therefore the measures for their reduction must be continuously
applied. Measures related to the focused part of the Strategy, i.e. direct support to export companies,
have been revised in accordance with the already started and newly defined activities, based on the
Agreement made between the Directorate for the Development of Small and Medium Sized
Enterprises and the Ministry of Economic Development.
Important activities aimed at achieving objectives stated in the Strategy are: establishing sectoral
associations of exporters, introduction of clustering and promotion of intra-sectoral and horizontal
clustering. Within the Government’s export dialogue, business associations and the private sector,
joint operative working groups have been formed whose task is to perform crucial export promotion
activities related to clustering, reduction of administrative barriers, education of exporters, financial
support, enhancing regional cooperation between enterprises and establishing a proactive economic
diplomacy programmes.
With a view to implementing a set of macro measures for the improvement of legal framework and of
institutional capacities, and for the reduction of administrative barriers, following a proposal of the
Ministry for Economic Development, the following Laws and by-laws, directly influencing the export
economy, have been passed: (i) Amendments to the Law on Foreign Trade, (ii) new Resolution on
the export / import / transit control list, (iii) Amendments to the Law on Foreign Investments, (iv)
Amendments to the Law on Free Zones (Official Gazette of Montenegro, no. 11/07), (v) Amendment to
the Law on Protection of Competition, (vi) Amendments to the Law on Business Companies (Official
Gazette of Montenegro, no. 17/07)


Foreign direct investments (FDI)
FDI is the main instigator of economic development of Montenegro. FDI inflows have been constantly
increasing since 2004; from EUR 53 million in 2004 to EUR 393 million in 2005, EUR 644 million in
2006 and EUR 1,008 million in 2007. Net FDI share in GDP amounted to 21.7% in 2007.




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                           FDI in Montenegro: main indicators for 2003–2007


                                           2003   2004     2005     2006      2007
 FDI inflows, EUR million                  44     53       393      644       1008
 Total FDI stock, EUR million                     97       490      1134      2142
 FDI share in GDP, %                       0,3    3,0      21,0     21,7      21,7
Source: Central Bank of Montenegro



FDI in Montenegro is dominated by foreign privatisations and by real estate acquisition. Although there
is only a number of more or less attractive enterprises left to be privatised (like thermal power plant
and coal mine in Plevlja, Port of Bar, hotels, manufacturing companies, companies in the field of
transport etc.), the privatisation process in Montenegro is in its final stage and the space for attractive
future foreign privatisations is, thus, gradually reducing. Montenegro will have to attract more
greenfield FDI projects in the future. Sectoral distribution of FDI in Montenegro is characterized by FDI
in real estate (35.2% of 2001–2006 inflows and as much as 53% of 2006 inflows) and in service
activities where the tourism activities dominate. The rest are investments in banking, basic industry
and manufacturing.
The Government puts strong hopes into further comprehensive inflows of FDI in the country. It is
expected that FDI inflows will remain the main source for balancing the current account deficit and be
one of the most significant instruments for the achievement of sustainable GDP growth and increase
of exports. The perspectives of Montenegro to attract sizeable amounts of FDI depend on the
perception of foreign investors about investment potential and the existing conditions in the country.
The Government believes that country’s strategic position, natural resources, low profit tax rate and
skilled labour force are the assurance for attracting more FDI in the future. `FIAS` put forward
accelerated economic reforms, excellent geographic location, qualified labour force and accelerated
privatisation process as the main proponents of future FDI inflows in Montenegro.
Regulatory and policy framework for FDI. Montenegro’s Law on Foreign Investments is based on the
national treatment principle. Foreign investor can establish a company and invest in it in the manner
and under the conditions which are the same as for domestic persons. This means that the same
regulations are applied to both domestic and foreign investors; there are no ’other’ regulations which
might deprive foreign investor of any rights or limit such rights. With the recent changes and
amendments as of July 2007, the Law on Foreign Investments is fully harmonised with the World
Trade Organization rules. The Law on Free Zones, which recent changes and amendments also make
it fully compatible with the World Trade Organization rules, assures additional advantages to investors
investing in the Free Zones. In terms of company registration procedures, the image of Montenegro
has also been improved in the eyes of foreign investors, and Montenegro has now become the leading
country in the region. Still, the problem of administrative barriers remains on the table. This problem is
especially obvious on the local administration levels (various permits, local fees etc.). Special attention
will be paid to this problem during the course of the Programme for the elimination of administrative
barriers.
Foreign Direct Investment Incentives Strategy of Montenegro was adopted in August 2006. According
to the Strategy, the main Montenegro’s FDI related objectives are attracting export-oriented FDI,
transferring technology and know-how into the country, and helping to create new jobs. Apart from
that, Montenegro specifically wishes to attract FDI in tourism, financial sector, energy sector,
technological and industrial sectors and in information-communication technologies. Measures
envisaged by the Strategy are divided into three groups: (i) general strategic measures, which provide
for the creation of an environment that is more conducive for business, and in the medium-term it will
result in reducing the general business risk in Montenegro, (ii) focused strategic measures, which
represent a set of regulatory and fiscal incentives that will result in further alignment of the investment
policy of Montenegro to the policy of the region, and its positioning in the region, (iii) promotional

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                                     Government of Montenegro


strategic measures, which in medium term will help building the image of Montenegro as an
investment destination, primarily through the implementation of general and targeted measures, and
by presenting and promoting positive examples of investments in the country. More precisely, in its
intention to increase the attractiveness of Montenegro for foreign investors, the Government focuses
on the following:
    Promotion of sustainable economic development, responsible fiscal policy and creation of
    favourable investment environment;
    Development of financial market, strengthening of the banking sector and other financial
    intermediaries;
    Development and strengthening of institutions for the attraction and promotion of FDI;
    Harmonisation of the labour legislation with EU standards;
    Implementation of the main infrastructural projects with the loans from international financial
    institutions and concessionary investments;
    Creation of a more liberal fiscal system for attracting FDI;
    Education reform in order to meet the needs of the priority sectors of the Montenegrin economy.
In March 2005, the Montenegrin Investment Promotion Agency (MIPA) has started to operate. The
scope of MIPA’s activities: (i) promotion of advantages of Montenegro as an investment location -
image building; (ii) attracting FDI by direct promotion - investment generation; (ii) services for foreign
investors (pre-, during- and post-investment services). More precisely, the activities of MIPA primarily
refer to the coordination and implementation of the Foreign Direct Investment Incentives Strategy
(recording and promotion), but also to the development of specific strategies or programmes for
particular sectors and countries (sources of investment), conducting of activities aimed at improving
the image of Montenegro as an investment location, establishing contacts and provision of
professional services to foreign investors, presentation of distinctive sectors and specific advantages
that Montenegro could offer to investors, conducting promotional activities, establishing public and
private partnerships, development of databases of target companies and potential investment
locations, etc.
In February 2007, the Foreign Investors Council was established. Its task is to play an active role in
the creation of investment policy, in particular by giving recommendations and suggestions for the
improvement of investment environment, elimination of barriers, and more efficient implementation of
measures defined in the Foreign Direct Investment Incentives Strategy. The Ministry for Economic
Development is providing the required logistics support to the Council. One of the first tasks of the
Council is to institutionalise the Foreign Investors Council in line with the model which is already
generally accepted in the countries where these Councils are already operational.
Protection of competition
The legislative framework for competition is given by the Law on Protection of Competition (Official
Gazette of the Republic of Montenegro, no. 69/05), in application since January 2006, and the Law on
Amendments to the Law on Protection of Competition (Official Gazette of the Republic of Montenegro,
no. 37/07). Implementing this Law, the Ministry for Economic Development proposes the policy to
protect and develop competition, monitors the aforementioned policy implementation, passes
regulations for the implementation of this Law, stipulates competition research methods, and performs
other tasks as envisaged by the Law.
Montenegro has established a Department for Competition Protection within the Internal Trade and
Competition Sector of the Ministry for Economic Development. The Law on Amendments to the Law
on Protection of Competition provided a legal framework for the establishment and operation of an
operationally independent body for competition protection, called the Competition Protection Authority.
To that end, a Decree on Amendments to the Decree on State Administration Organization and
Operations was adopted (Official Gazette of the Republic of Montenegro, no. 06/07). Its establishment
is pending, to start operating in the first quarter of 2008. This will provide compliance with European
regulations in the area of competition protection, which is the solution agreed with the EU during the
stabilisation and association negotiations.


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                Government of Montenegro




      3. ABILITY TO ASSUME OBLIGATIONS

         FROM THE EU MEMBERSHIP




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                                  National Program for Integration



3.1. FREE MOVEMENT OF GOODS

3.1.1. HORIZONTAL ISSUES

3.1.1.1. Standardization
3.1.1.1.1. Status
Legislative framework
 In the field of standardization, Montenegro applies the Law on Standardization (Official Gazette of
Serbia and Montenegro number 44/05) on the basis of the Resolution on the declaration of
independence of the Republic of Montenegro (Official Gazette of the Republic of Montenegro number
36/06), which established that until appropriate Montenegrin regulations were adopted, valid regulation
would apply accordingly of the state union Serbia and Montenegro.
The Government of Montenegro adopted the Decision on establishing Standardization Institute of
Montenegro (Official Gazette of the Republic of Montenegro number 21/2007) as a National
standardization body.
The drafting of the Montenegrin Law on Standardization started at the beginning of the Second quarter
of 2007 using as the basis the Law of Serbia and Montenegro, as well as the ANNEX 3 of the
Agreement TBT/WTO entitled "Code of good practice for drafting, adoption and application of
standards". The draft Law passed through the public debate, the Government came up with a Bill and
the Parliament has adopted it in the first half of 2008 (Official Gazette of Montenegro number 13/08).
Institutional framework
The Ministry of Economic Development is the competent institution for the filed standardization in
Montenegro, whilst the Standardization Institute of Montenegro is in charge with the implementation.
The Decision on establishing the Standardization Institute of Montenegro establishes the activity,
membership, bodies, financing and supervision over the work of the Institute, as well as other issues
relevant for the work of the same. At the beginning of 2008, there were 5 employees in the Institute,
whilst the Regulation on internal organization and job systematization of the Institute envisages for the
same to have 32 employees.
On 1st June 2007, the Standardization Institute acquired the status of a correspondent member of the
International Standardization Organization (ISO) and participates as an observer in the work of 17
technical committees of the ISO. The membership in the ISO made it possible to apply for the
membership of the CEN which is planned for the beginning of 2008.
The Agreement on business-technical cooperation was signed with the Serbian Standardization
Institute. With the realization of this agreement, the Montenegrin Standardization Institute will come
(amongst other things) in the possession of one part of the database (standards and similar
documents) which existed at the level of the former state union Serbia and Montenegro, which is of
decisive significance for the initiation of work of this institution. The Agreement on business-technical
cooperation has also been signed with the Standardization Institute of Bosnia and Herzegovina.
Within the framework of the programme of pre-accession assistance IPA 2007, the project entitled
“Further development of quality infrastructure in Montenegro” was approved, which in one its part is
intended for the strengthening of the standardization system in Montenegro.


3.1.1.1.2. Short-term priorities
Legislation
Montenegrin Law on Standardization has been adopted in 2008 (Official Gazette of Montenegro
number 13/08) and it has been harmonized with the general provisions of the Agreement on technical
obstacles to trade of the World Trade Organization, as well as with the Code of good practice for
drafting, adoption and application of standards, which is given as the Annex 3 of the Agreement. Full

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                                      Government of Montenegro


compliance with the Agreement will be achieved following the adoption of the internal rules of the
Standardization Institute related to the adoption of standards, which have to be harmonized with the
rules of European and international standardization organizations, as well as with the Code of good
practice for drafting, adoption and application of standards from the Agreement on technical obstacles
to trade of the WTO. It is expected for the internal rules of the Institute to be adopted by the end of the
Second quarter of 2008.
The Law is also partially harmonized with the basic requirements of the Directive 98/34/EC, which
prescribes information procedures in the field of standardization and technical regulations. Greater
degree of harmonization will be achieved following the adoption of the internal rules for the adoption of
standards by the Institute. The Law is also in compliance with the Instruction for main administrative
structures necessary for the implementation of the Acquis.
Following the adoption of the Law on Standardization, the Institute will perform the review of the
existing and the adoption of new internal acts with the purpose of performing basic activity of the
Institute, which is the adoption of Montenegrin standards and similar documents in the manner which
is harmonized with the requirements and recommendations of the international and European
standardization organizations.
Institutions
During 2008, there are plans to realize activities on development, strengthening and improvement of
the standardization system at the national level. Having in mind the fact that the Institute was
established in the mid-2007, as an activity for its successful and high quality future operation, it is
planned to strengthen administrative capacities of the Institute for carrying out the activities on national
standardization and representation of Montenegro in the work of international and European
standardization organization.
The activities that the Institute plans to perform during 2008 are:
1) Activities of standardization, standard distribution and information:
   Establishing the infrastructure of advisory and expert bodies (technical committees, sub-
   committees and working groups) for performing the activities of national standardization,
   Preparation, acceptance, publishing and distribution of Montenegrin standards and similar
   documents from the area of standardization,
   Publishing the information on public debate with regards to the draft Montenegrin standards,
   Offering information on accepted Montenegrin standards, information on withdrawal of
   Montenegrin standards, as well as information on other documents from the field of
   standardization,
   Establishing and maintaining the collection and drafting the catalogue of Montenegrin standards.
2) Activities on supporting public administration by the issues of technical legislation:
   Acceptance and issuance of Montenegrin standards necessary for the implementation of technical
   legislation,
   Preparation of the inventory of Montenegrin standards which accompany technical regulations
   passed by line ministries,
   Offering of other information to public administration bodies in relation to standards and
   standardization.
3) Training:
   Expert training and on-job training in the Institute,
   Carrying out expert education of interested parties in the field of standardization and similar
   activities.
4) International cooperation:
   Achieving membership and representation of Montenegro in the European (CEN, CENELEC,
   ETSI) and international (ISO, IEC) standardization organizations,
   Creating conditions for the participation of Montenegrin representatives in the work of international
   and European standardization organizations,

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   Acceptance, registration and distribution of working documents,
   Establishing information centre according to the Agreement on technical obstacles to trade (WTO/
   TBT),
   Establishing a contact point for Codex Alimentarius,
   Cooperation with the national standardization bodies of other countries,
   Participation in technical assistance projects for the development of standardization system in
   Montenegro.
5) Documentation and information:
   Drafting of the internal acts of the Institute,
   Acquisition and maintenance of the database and the collection of European, international
   standards and similar documents, as well as national standards and similar documents of other
   countries,
   Providing information on national, European and international standards to entire public and
   economy in particular.
Having in mind the existing condition, as well as the fact that the stage of the development of
administrative capacities of the Institute is about to commence, it is estimated that in June 2008 the
Institute will adopt the first 500 Montenegrin standards, harmonize them with the European and
international standards, following the procedures and rules established by the international and
European standardization organizations.
Following the obligations and priorities which result from the Agreement on stabilization and
association (SAA), positive experiences of the countries in the region, recommendations of the EU
experts, as well as the needs of Montenegrin economy, the greatest part of the above stated number
of standards that the Institute plans to adopt in the next year, will be Montenegrin standards
harmonized with the so called harmonized European standards (standards which follow and enable
the implementation of the EU directives of the new approach), as well as the standards which follow
the EU sectoral directives, whilst other European and international standards will be represented in a
smaller number.
3.1.1.1.3. Mid-term priorities
Legislation
There will be activities on the implementation of the provisions of the new Law on Standardization,
bylaws and internal acts of the Institute.
The Institute will offer support to line ministries at drafting technical and other national legislation
through ensuring necessary information and documents which might serve as a basis for the drafting
of technical and other regulations.


Institutions
In the mid-term period further strengthening is planned of the administrative capacities of the Institute
for carrying out the activities of national standardization and representation of Montenegro in the work
of international and European standardization organizations.
The activities that the Institute plans to realize in the mid-term period are:

   Further establishing of infrastructure of advisory and expert bodies (technical committees, sub-
   committees and working groups) for performing the activities of national standardization,
   preparation, adoption, publishing and distribution of Montenegrin standards and similar documents
   from the field of standardization,
   establishing and maintaining the collection and drafting the catalogue of Montenegrin standards,
   support to public administration by technical legislation issues through the adoption and publishing
   of Montenegrin standards necessary for the implementation of technical legislation,

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                                         Government of Montenegro


   further expert training and on-job training in the Institute,
   carrying out education interested parties in the field of standardization and similar activities,
   achieving membership and representation of Montenegro in the European (CEN, CENELEC,
   ETSI) and international (ISO, IEC) standardization organizations,
   creating conditions for the participation of Montenegrin representatives in the work of international
   and European standardization organization,
   performing the activities of the information centre according to the Agreement on technical
   obstacle to trade (WTO/TBT),
   performing the activities of the contact point for Codex Alimentarius,
   establishing contact with national standardization bodies of other countries,
   participation in the projects of technical support for the development of the standardization system
   in Montenegro,
   providing information on national, European and international standards to the entire public, and
   especially to economy,
   securing spatial, technical, personnel and other conditions for the work of the Institute.
Employment plan
The Act on internal organization and systematization was adopted by means of the Resolution of the
Managing Board of the Institute, envisaging the total number of 32 employees. It is envisaged that
during the year 2008 most positions envisaged by the systematization be filled, and the very dynamics
will depend on spatial conditions and personnel potential available on the Montenegrin labour market.


                                  Existing -                             Planned number of employees
          Institution                                2007
                                  planned                     2008.       2009.       2010.   2011.    2012.
Standardization Institute         Existing               5     32          32          32      32       32
Financial requirements

                         2008.                  2009.          2010.                2011.          2012.
      Budget            675.000                800.000       1.000.000            1.200.000      1.250.000
Foreign support



3.1.1.2. Accreditation
3.1.1.2.1. Status
Legislative framework
Montenegro still applies the Law on accreditation adopted at the level of the state union Serbia and
Montenegro (Official Gazette of the Serbia and Montenegro number 44/05), based on the Resolution
on the declaration of independence of the Republic of Montenegro (Official Gazette of the Republic of
Montenegro number 36/06).
According to the Constitutional Charter, the accreditation activities in Serbia and Montenegro, until the
declaration of independence of Montenegro, were being carried out by the Accreditation body of
Serbia and Montenegro - JUAT which was the integral part of the Ministry of internal economic
relations of Serbia and Montenegro. Following the declaration of independence by Montenegro, in
accordance with the Constitutional Charter, the JUAT transformed into the Accreditation body of
Serbia. All the requirements and accreditation cases from Montenegro, which at the time were in the
procedure with the JUAT, were returned to the Ministry of economy of Montenegro for further
procedure.


Institutional framework
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                                  National Program for Integration


On 29th March 2007, the Government of Montenegro passed the Decision on establishing the
Accreditation Body of Montenegro (Official Gazette of the Republic of Montenegro number 21/07), by
means of which both the name and the seat of the Accreditation Body were defined, its activity,
bodies, financing and supervision over the work of the Accreditation Body.
The Accreditation Body of Montenegro is a legal entity, independent, non-profit organization
established for the purpose of establishing the competence of organizations for carrying out the
activities of compliance appraisal.
Following the establishment of the Managing and Supervisory Board, the following documents were
passed: the Statute, Managing Board Rules of Procedure, Quality Rules of Procedure, Quality Policy,
Accreditation rules, Accreditation Body Work Programme for 2008, Decision on the extent of
accreditation expenses and the Decision on job systematization. Currently, there are ongoing
preparations for the beginning of activities of accreditation of organizations from Montenegro, so that
the first accreditations are expected by the end of the First quarter of 2008.
The basic task of the Accreditation Body is to establish the accreditation system in Montenegro which
would be of importance for all interested parties: users of services of accreditation organizations,
accredited organizations themselves, the Government and state institutions (especially in the part of
regulated sphere) and, finally, consumers themselves who should use products of guaranteed quality
and safety.
Regional and international cooperation
The Accreditation Body of Montenegro participated in tow General Assemblies of the European
Accreditation Cooperation (EA), at technical committees for inspection organizations, certification
bodies and laboratories, as well as at the meeting of accreditation bodies of Southeast Europe; the
request has been forwarded for signing the contractual relation with the EA, so that the conclusion of
the agreement is expected at the next General Assembly, in May 2008, following the approval of the
MAC committee.
In the field of accreditation the Agreement on cooperation was signed with the Accreditation Body of
Serbia. The realization of this Agreement will result in the harmonization of accreditation processes in
the region, which is in accordance with the Agreement on free trade in Central Europe - "CEFTA
2006", ANNEX 1, Chapter IV – Technical obstacles to trade. The Accreditation Body of Montenegro
has plans to sign the agreements on cooperation in the field of accreditation with the accreditation
bodies from the region by the end of the First quarter: The Accreditation Institute of the Republic of
Macedonia, the Accreditation Institute of Bosnia and Herzegovina, the Accreditation Directorate of
Albania and the Croatian Accreditation Agency.
The talks were being held with the EU experts from the filed of accreditation in relation to future
projects for improving accreditation in Montenegro, like IPA project (Pre-accession Assistance
Instrument) and CARDS project.
3.1.1.2.2. Short-term priorities
Legislation
The Law on accreditation will be adopted by the end of the Fourth quarter of 2008. This law will
regulate further upgrading of the accreditation system in Montenegro. The Law will be harmonized
with the requirements of the Article 77 of the Agreement on Stabilization and Association for the field
of accreditation, and with the Proposed Decree of the European Parliament and the Council which
envisages accreditation conditions and market monitoring with regards to putting products in
circulation submitted by the European Community Commission.
Institutions
The most important activity of the Accreditation Body during 2008 is full organization of technical
committees for laboratories and inspection organizations and the Accreditation Committee headed by
accreditation experts. This will enable the Accreditation Body efficiently perform its basic activity,
which is to establish competency of organizations for carrying out compliance appraisal activities:

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examination, calibration, inspection, certification of products and processes, certification of
management system and certification of expert persons in accordance with the requirements and
recommendations of international and European accreditation organizations.
The activities that the Accreditation Body plans to realize during 2008 are:
1) activities of supervisory appraisal of Montenegrin organizations accredited with the Accreditation
    Body of Serbia and Montenegro, as well as those that were in the accreditation procedure
    application of the revision of the ISO 17025 standard
    passing accreditation decisions
2) activities on appraising organizations being accredited for the first time and passing accreditation
   decisions
3) raising competence level and strengthening capacities of the Accreditation Body, through
   establishing, training and permanent improvement of the activities of technical committee, of the
   Accreditation Commission and of the Commission for monitoring appraisers’ competencies.
4) Training
   expert training and on-job training of the employees of the Accreditation Body, members of the
   Managing Board and of Technical Committees
   Training for medical laboratories’ appraisers (ISO 15189) (May 2008)
   Training for inspection organizations appraisers (ISO 17020) (September 2008)
   Training for employees, Managing Board and Accreditation Commission members (ISO 17011)
   (February 2008)
   Conducting expert training of interested parties in the field of accreditation
   Establishing appraisers’ and technical experts’ databases
5) Documentation and information
   Drafting remaining internal acts of the Accreditation Body:
   Regulation on filing and office operations
   Regulation on expert and scientific training
   Code of Ethics of the Montenegrin Accreditation Body
   Acquisition of adequate software for administrative-organizational activities and quality system
   documentation management
   Preparation and maintenance of Internet presentation
6) International cooperation
   Achievement of membership and representation of Montenegro in the European Accreditation
   Cooperation (EA) and the International Organization for Accreditation of Laboratories (ILAC)
   Creating conditions for the participation of Montenegrin representatives in the work of international
   and European accreditations organizations,
   Participation in the projects of technical assistance for the development of accreditation system in
   Montenegro.
   Bilateral, as well as regional cooperation in the field of accreditation.
3.1.1.2.3. Mid-term priorities
In line with the recommendations from the European Partnership, mid-term priorities include the
following:
     Continue with the transposition of directives of the new and global approach, as well as of the
     directives of the old approach
     Full membership in the international accreditation organizations - EA and ILAC; the deadline for
     the EA is the Fourth quarter of 2011 and for the ILAC it is the Fourth quarter of 2012.
Legislation
The Law on accreditation should enable the preparation and adoption of regulations from the field of
accreditation with the purpose of protection of interests of all citizens, service users, accredited

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organizations, enterprises, state interests etc, harmonized with the EU Acquis Communautaire and the
EA documents.
Institutions
Further development of the accreditation system of Montenegro comprises the institutional
strengthening of the Accreditation Body of Montenegro and raising the level of awareness on the need
for accreditations in Montenegro, as the most reliable manner of proving competence so far.
Strengthening of all segments of quality infrastructure in Montenegro, as well as of administrative
capacities of the Accreditation Body of Montenegro, are the prerequisites for further strengthening of
the accreditation system in Montenegro.
3.1.1.2.4. Employment plan

                                                                               Planned number of employees
      Institution          Existing - planned          2007
                                                                     2008         2009        2010        2011         2012
Accreditation Body
                           Existing                      3             8            9             10       11           12
of Montenegro
3.1.1.2.5. Financial requirements
The table below indicates the Financial requirements of the Accreditation Body of Montenegro:
                            2008                2009                  2010                 2011                  2012
Budget                                    € 350.000,00         € 420.000,00         € 490.000,00          € 550.000,00
                       € 260.000,00
Foreign support              **                   **                    **                   **                   **
*proposal of the Min
**Within the framework of IPA 2007 the following project has been proposed: “Further development of quality infrastructure in
Montenegro”, with the planned budget of two million euros (€ 1.000.000,00 – technical assistance and € 1.000.000,00 –
equipment and building). We expect for the Accreditation Body of Montenegro to receive certain funds as well.

3.1.1.3. Compliance assessment
The compliance appraisal in Montenegro was being carried through various approaches in relation to
different forms of previous state unions. All the time, the main guideline was in the field of products
safety, with the special emphasis on those groups of products which belong to the directives of the
"old EU approach" like alimentary products, motor vehicles, chemicals and so on. It is important to
mention that the system has had no incidences, i.e. that side of the market has obviously been well
protected as regards products safety.
3.1.1.3.1. Status
Legislative framework
At the level of the ex-Serbia and Montenegro, in October 2005, the Law was adopted on technical
requirements for products and products compliance appraisal with prescribed requirements (Official
Gazette of Serbia and Montenegro number 44/05), which was effective in Montenegro until the
adoption of the national legislation. The Law on Standardization and the Law on technical
requirements for products and products compliance appraisal with prescribed requirements (in the
meantime adopted, Official Gazette of Montenegro number 13/08 and OG MNE number 14/08) also
include the requirements which have to be met in relation to the negotiations with WTO and SSP. As
for the commitments from the SSP, the compliance appraisal in the area of “New approach” has been
incorporated in all modules as well as in the area of “old approach” related to the definition of the
procedure of authorization and appointment of compliance appraisal body.
The Committee of the Programme of the Government of Montenegro for Quality was established and
it managed the activities of quality infrastructure for the needs of Montenegro (until the independence,
quality infrastructure institutions were located in Belgrade, at the level of the State Union). Following
the passing of the Resolution on declaration of independence, the Committee of the Government of

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                                     Government of Montenegro


Montenegro remained as an advisory body through which the interested parties address the
Government with regards to the regulation of the so called non-regulated area of the market.


Institutional framework
The Department for quality infrastructure, within the framework of the Ministry of economic
development, carries out the activities which are related to: monitoring of and participating in the
drafting of regulations which regulate the area of technical legislation, standardization system,
metrology system, accreditation system and compliance appraisal system; establishing and keeping
the register of technical regulations and the register of authorized bodies for compliance appraisal;
notification according to the agreement WTO/TBT (contact point for WTO/TBT); approximation of the
national legislation to the EU legislation from the field of quality infrastructure; offering logistical
support for the development in the area of quality infrastructure; organization of meetings, tribunes,
lectures from the area of competence of the Department; offering information to interested legal
entities on the issues from the scope of activities of the Department; carrying out expert and
administrative activities for the needs of the Committee of the Programme of the Government of
Montenegro for Quality; keeping records necessary for monitoring the condition and for the initiation of
activities from the sphere of work of the Department; realization of cooperation with other ministries
and public administration bodies.
3.1.1.3.2. Short-term priorities
The following laws will be adopted during 2008:
   Law on Standardization – First quarter 2008 (adopted, Official Gazette of Montenegro number
   13/08)
   Law on metrology – Third quarter 2008.
   Law on accreditation – Fourth quarter 2008.
   Law on technical requirements for products and products compliance appraisal with prescribed
   requirements – First quarter 2008 (adopted, Official Gazette of Montenegro number 14/08)
   Law on general products safety – First quarter 2008.
Therefore, until the end of 2008, the legislative framework will be contained in five laws, which cover
various fields of compliance appraisal:
    Compliance appraisal related to technical regulations from the Law on technical requirements for
    products and products compliance appraisal with prescribed requirements (regulated area – legal
    obligations)
    Compliance appraisal related to standards from the Law on Standardization (non-regulated area -
    voluntary)
    Logistical support of metrology to compliance appraisal (Law on metrology)
    Logistical support of accreditation to compliance appraisal (Law on accreditation)
    Filling the gaps in legislation (Law on general products safety)
During 2008, the following bylaws will also be adopted:
   Regulation on procedure of certification of laboratories and requirements which they must meet
   Decree on manner of certification of bodies for compliance appraisal, register of certified bodies for
   compliance appraisal, record on compliance instruments, compliance marks and bodies for
   compliance appraisal, as well as conditions for application of technical regulations of other
   countries
   Decree on notification procedure in the filed of technical regulations, standards and compliance
   appraisal procedures
   Decree on manner of drafting and adoption of technical regulations and register of such
   regulations.
These bylaws will define in details the procedures in the area of appointment/certification, registration,
conditions and supervision over the work of compliance appraisal bodies. It is important to mention
that this bylaw initiative will define and systemic separation from the field of market supervision. Also,

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currently effective approach of “pre-regulation” will be abandoned, linked to the regulation of the same
issues in the field of metrology, accreditation and compliance appraisal system under the supervision
of the management. For the first time in Montenegro, this legislation will separate metrology
(calibration) from the system of compliance appraisal which is the requirement of the European
organizations in this field.
The Law on Standardization and the Law on technical requirements for products and products
compliance appraisal with prescribed requirements, as systemically related laws, are partially
harmonized with the Directive 98/34/EC, which prescribes the obligation of the member states,
national standardization bodies, the Commission, standing committee on the occasion of the adoption
of standards and technical regulations. Greater degree of compliance will be achieved following the
adoption of bylaws, the Decree on notification procedure in the field of technical regulations, standards
and compliance appraisal procedures and the Decree on manner of drafting and adoption of technical
regulations and register of these regulations.
The Law on technical requirements for products and products compliance appraisal with prescribed
requirements was also harmonized with the Decision dated 22nd July 1993 which is related to various
modules for the approach to compliance appraisal for the setting of and the use of compliance mark
CE, which is used pursuant to the requirement of the directives for technical harmonization, with the
compliance with the annex, which prescribes the procedures (modules) and CE markings, to be
harmonized following the adoption of the Decree on manner of certifying bodies for compliance
appraisal, register of certified bodies for compliance appraisal, record on compliance instruments,
compliance marks and compliance appraisal bodies, as well as the conditions for the application of
technical regulations of other countries.
Until the end of 2008, in line with the annual Programme of work of the Government, the register of
technical regulations will be established, as well as the register of certified/appointed bodies for
compliance appraisal. During 2008, the information point for technical regulations and compliance
appraisal with TBT/WTO will be prepared and start working.
3.1.1.3.3. Mid-term priorities
Legislation
With the realization of short-term priorities, conditions will be met for the beginning of work in the
intersectoral and interministerial cooperation on transposing the directives of the new and old
approach. Both types of directives comprise horizontal support in the field of compliance appraisal. In
order for this support to be offered, the said registers will be updated when competent bodies for the
free flow of goods ensure a complete programme of commitments which stem from the national
programme of integrations, with the positive opinion of the competent line ministries. From these mid-
term activities in the area of compliance appraisal administrative capacities should be created for the
procedure of "notification" of appointed bodies for compliance appraisal to the Notification Committee
of the European Commission.
Institutions
The Department for quality infrastructure within the framework of the Ministry of Economic
Development has got three permanently employed and one trainee. The training will be carried out
continuously through the cooperation with the partners from the EU and the civil sector.


3.1.1.3.4. Employment plan

       Institution          Existing -        2007                Planned number of employees
                            planned
                                                          2008       2009      2010      2011     2012
 MED – Department for
                             Existing          3+1          7         7          8        9         10
  quality infrastructure



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3.1.1.3.5. Financial requirements

                    2008             2009              2010              2011               2012
   Budget         € 50.000         € 80.000          € 80.000          € 80.000           € 80.000

  Foreign        € 219.000
  Support        (IPA 2007)

3.1.1.4. Metrology
3.1.1.4.1. Status
Legislative framework
On 30th August 2007, the Government of Montenegro adopted the Strategy of metrology development
in Montenegro, which was planned by the Action Plan for the implementation of recommendations and
support to examination laboratories, cooperation of scientific and other institutions in the field of
metrology and the popularization of metrology in Montenegro.
In the field of metrology, Montenegro applies the laws adopted at the level of the former state union
Serbia and Montenegro:
    Law on metrology (Official Gazette of Serbia and Montenegro, number 44/05)
    Law on inspection of objects made of precious metals (Official Gazette of the FRY, number 80/94).
On the day of the beginning of the implementation of the Law on metrology, on 1 st January 2006, the
Law on measurement units and standards (Official Gazette of the FRY, 12/98) ceased to be effective.
The Law on metrology regulates the system of measurement units and standards, certification of
standards, authorization of laboratories, metrological inspection of pre-packed products, effectiveness
of foreign marks and documents, metrological monitoring, as well as institutional framework its
application.
Bylaws adopted on the basis of the law on metrology:
   Decree on legal measurement units (Official Gazette of Serbia and Montenegro number 10/06),
   harmonized with the directives 31980L0181, 31985L0001, 31989L0617, 31999L0103 and the
   recommendation 31976H0223
   Regulation on manner and conditions of standards certification (Official Gazette of the Republic of
   Montenegro number 2/07),
   Regulation on manner in which examination is conducted of the type of standard (Official Gazette
   of the Republic of Montenegro number 2/07)
   Instruction on performing metrological monitoring (Official Gazette of the Republic of Montenegro
   number 2/07)
   Ordinance on types of standards for which certification is mandatory, i.e. certification of type of
   standard (Official Gazette of the Republic of Montenegro number 3/07) / previous four bylaws have
   been harmonized with the directives 31971L0316, 31972L0427, 31983L0575, 31987L0354,
   31987L0355, 31988L0665 i 32007L0013, and partly harmonized with 31990L0384 and
   32004L0022
   Order on types and shapes of stamps and other marks used at certification standards (Official
   Gazette of the Republic of Montenegro number 3/07).




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Institutional framework
In 2006, the Government of Montenegro established the Institute of metrology. In accordance with the
Decree on the organization and manner of work of the public administration, the Institute performs the
following activities:
     Takes care of the system of legal measurement units in Montenegro;
     realizes, keeps, maintains and improves Montenegrin standards and secures their participation in
     international activities;
     ensures metrological traceability for standardization laboratories, as well as for examination and
     inspection laboratories;
     organizes standardization activity;
     caries out compliance appraisal of standards with metrological requirements;
     gives expert opinion as regards certification of laboratories for certification of standards;
     represents Montenegro in international and regional metrological organizations and establishes
     cooperation in the field of metrology;
     conducts metrological inspection;
     cooperates with responsible inspection bodies and secures professional bases for standards and
     pre-packed products;
     keeps register of certified laboratories;
     ensures metrological information and issues official publication;
     performs other activities from the filed of metrology.
The Metrology Institute, as the NMI (National Metrology Institute), is the institution which has been
appointed by the national decision to develop and maintains national standards of one or several
values.


The organizational structure of the Metrology Institute consists of three sector:
   - the Sector for cooperation with regional and international metrological organizations
   - the Metrological-inspection sector (mass, volume, length, electrical values and precious
       metals) and
   - the Sector for legal affairs, inspection supervision and administrative procedure
   - and the Service for general affairs.
The regulation on internal organization and systematization of jobs of the Metrology Institute, adopted
by the Government of Montenegro on 10th May 2007, envisages 34 civil servants and employees. The
envisaged number of positions is not optimal from the point of view of establishing national
metrological institution, but it is acceptable for the initial stage of the development of the Institute and
its metrological laboratories for mass, length, electrical values, volume, precious metals. In the
Institute there are currently 19 employees.
As of 1st July 2007, the Metrology Institute is a member of the EURAMET (Associate Status), and the
representatives of the following technical committees have been appointed: TC – EM (Electricity and
Magnetism), TC – IM (Interdisciplinary Metrology), TC – F (Flow) and TC – M (Mass and related
Quantities). The delegates of the Metrology Institute participated in annual assembly of the EURAMET
and took part in the work of the TC – EM committee. At the end of November 2007, the Metrology
Institute also became a member of the OIML (Corresponding Member), and the activities have been
undertaken on joining the WELMEC.
The Metrology Institute and the PTB (Physikalish - Technische Bundesanstalt) – German National
Institute of Metrology organized the round table: "Developing strategies for EURAMET integration for
the Western Balkan countries” held in Podgorica from 16th to 18th July 2007 with the participation of the
representatives of the national metrology institutes from the region.




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                                    Government of Montenegro


Within the framework of the project Development of Quality Infrastructures in Montenegro, in the
period from 18th to 24th November 2007, the representatives of the Metrology Institute visited the State
Metrology Institute in Croatia.
At the end of 2006, one representative of the Metrology Institute participated in the evaluation of the
management system and the capacity of metrological laboratories within the framework of CARDS
2002 project "Co-operation committee sub-group facilities for joint-use".
During 2007, the representatives of the Metrology Institute took part in the seminars, workshops etc.
organized by the national metrology institutes from Germany, Turkey, Bulgaria and Greece.
The project entitled: “Further development of quality infrastructure in Montenegro (standardization and
metrology)” was proposed within the scope of the IPA 2007, and the planned budget amounts to € 2
million. The CARDS funds have not offered considerable assistance in the field of metrology in
Montenegro.
3.1.1.4.2. Short-term priorities
Legislation
With the purpose of formulating the acts which prescribe the requirements which must be met by
standards and their use, as well as the requirements which are related to measuring and inspection
methods, including even pre-packed products, as well as with the aim of creating adequate conditions
for the practical application of regulations and the execution of metrological monitoring in Montenegro,
new Law on Metrology will be adopted in the Second quarter of 2008, which will be harmonized with
the Acquis and the documents of the International Metrology Organization.
The bylaws which will be adopted on the basis of the new Law on Metrology during 2008 and 2009 are
the following:
− Decree on legal units of measurement, in the Fourth quarter of 2008.
− Regulation on metrological conditions for pre-packed products, in the Fourth quarter of 2008.
− Regulation on the manner and conditions of the certification of standards, in the Fourth quarter of
    2008.
− Regulation on the manner in which the examination of the type of standard is conducted, in the
    Fourth quarter of 2008.
− Instruction on the execution of metrological monitoring, in the Fourth quarter of 2008.
− Order on types of standards for which certification is mandatory, i.e. approval of the type of
    standard, in the Fourth quarter of 2008.
− Order on types and forms of stamps and other marks used at certification of standards, in the
    Fourth quarter of 2008.
− Regulation on metrological conditions for parallelepiped weights of 5 kg up to 50 kg, of average
    precision, and cylindrical weights of 1g up to 10 kg, of average precision, in the Fourth quarter of
    2008.
− Regulation on metrological conditions for devices for determining hectolitre mass of cereals and
    oleaceous plants, in the Fourth quarter of 2008.
− Regulation on metrological and technical conditions for ship tanks, in the First quarter of 2009.
− Regulation on metrological conditions for weights with nominal masses of 1 mg up to 50 kg, in the
    Second quarter of 2009.
− Regulation on monitoring devices for the control of the work of drivers and movement of motor
    vehicles in road traffic, in the Second quarter of 2009.
− Regulation on metrological conditions for alcohol-metres and alcohol areometres, in the Third
    quarter of 2009.
− Regulation on metrological conditions for manometers for measuring pressure in automobile tyres,
    in the Fourth quarter of 2009.
− Regulation on technical requirements and compliance appraisal procedures for non-automatic
    scales, in the Fourth quarter of 2009.


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The new Law on inspection of objects made of precious metals will be adopted in the Fourth quarter of
2008. With the purpose of prescribing type and form of stamps to designate the fineness of objects
made of precious metals in Montenegro, as well as the content, shape and dimensions of the
manufacturers of objects made of precious metals, the First quarter of 2009 shall see the adoption of
the following bylaws:
− Order on types and forms of stamps for designating degree of fineness of objects made of
    precious metals;
− Order on marks of manufacturers of objects made of precious metals.
Institutions
The Metrology Institute was established in September 2006 but it is necessary for the same to be
reorganized with the purpose of further improvement of metrology in Montenegro, i.e. establishing of
metrological laboratories, as well as conducting the activities from the field of legal metrology,
industrial metrology and scientific metrology. The new Regulation on internal organization and job
systematization, which would envisage greater number of the employed, will be adopted in the First
quarter of 2009.
The metrological laboratory for mass, metrological laboratory for length and metrological laboratory for
electrical values will be established in the Fourth quarter of 2008.
The metrological laboratory for pressure, metrological laboratory temperature, metrological laboratory
for measurements in the field of microwave values and precious metals laboratory will be established
in the Fourth quarter of 2009.
3.1.1.4.3. Mid-term priorities
Legislation
The Regulation on technical and metrological conditions related to standards, which transposes the
directive on measuring instruments (MID) 32004L0022 to the Montenegrin legislation will be adopted
in the Fourth quarter of 2010.
Institutions
Further development of metrology in Montenegro comprises the strengthening of the segment of
scientific metrology, i.e. further development of metrological laboratories of the Metrology Institute.
The laboratory for measurements in the field of chemistry, metrological laboratory for weather and
metrological laboratory for frequency will be established in the Fourth quarter of 2010.
3.1.1.4.4. Employment plan
The total number of the employed in the Metrology Institute, as well as the planned number of the
employees is shown in the table below.


                                                                   Planned number of employees
     Institution       Existing - planned       2007
                                                           2008      2009     2010      2011      2012

 Metrology Institute       Existing              19         34        42        50       59        67

Training plan
The realization of the envisaged metrological activities comprises also a comprehensive plan for the
training of employees in the Institute. Apart from the participation in seminars and other forms of
training organized by the Civil Servants Agency, it is also necessary to organize seminars from the
following areas: transposition of the MID, measuring insecurity, examination of the type of standard,
metrological monitoring, EU legislation, harmonization of technical regulations, standardization, pre-
packed products, use of software in metrology, work in metrological laboratories, metrology in
chemistry etc.

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      Government of Montenegro




142
                                       National Program for Integration



3.1.1.4.5. Financial requirements

                       2008               2009             2010              2011           2012
   Budget           € 521.861          € 940.000        € 1.270.000       € 1.710.000    € 2.300.000
   Foreign          € 627.000
                                            *                *                 *              *
   support            (IPA)
* - It is not known whether there will be any kind of

3.1.1.5. Market surveillance
3.1.1.5.1. Status
Legislative framework
The legislative framework within which market surveillance is carried out in Montenegro comprises
substantive and procedural laws and bylaws.
The most significant substantive regulations are:
   Laws in the field of quality infrastructure: Law on technical requirements for products and on
   products compliance appraisal with prescribed requirements, Law on Standardization, Law on
   accreditation, Law on metrology, Law on inspection of objects made of precious metals, as well as
   technical regulations adopted on the basis of the former Law on Standardization, which are applied
   until the adoption of new technical regulations, as well as the Decree on fines prescribed by the
   Law on metrology and the Law on technical requirements for products and on products compliance
   appraisal with prescribed requirements;
   Law on companies, Law on trade, Law on foreign trade and Law on circulation of goods;
   The laws related to the protection of right to intellectual property: Law on copyright and similar
   rights, Law on patents, Law on stamps, Law on marks of geographical indication, Law on legal
   protection of design, Law on protection of topographies of integrated circuits, as well as: Law on
   application of regulations which regulate protection of intellectual property rights, Law on optical
   disks, Law on cinematography, Law on protection of herbal species and bylaws.
   Law on consumer protection; Law on competition protection;
   Law on tourism; Law on skiing resorts; Law on marine zone;
   Law on food safety (became effective on 29th December 2007)
   Law on food safety and objects of general use, Law on health monitoring of food and products of
   general use (provisions related to general use of objects), as well as bylaws.
   Other laws from the field of healthcare: Law on drugs and medical devices, Law on health
   protection, then the Law on chemicals, Law on protection from ionizing radiations, Law on
   transport of hazardous substances and so on.
   Law on veterinary service, Law on identification and registration of animals, laws on fishing
   (freshwater and sea water), Law on plant protection (the part related to pesticides), as well as the
   Law on fertilizers, Law on seed material of agricultural plants, Law on planting material etc;
   Laws on environment, Law on elements of environment protection;
   Other sectoral laws containing special provisions on inspection monitoring, i.e. law on tobacco,
   Law on restricting the use of tobacco products, as well as the Law on energy, Law on
   telecommunications, Law on broadcasting and others.
Procedural laws which regulate the rules of inspection monitoring and the obligations and authorities
of inspectors and administrative measures and actions undertaken in the procedure of inspection
monitoring, are the following:
    Law on inspection monitoring (Official Gazette of the Republic of Montenegro number 39/03) and
    special laws on work of individual inspections – Law on market inspection and Law on sanitary
    inspection (Official Gazette of the Republic of Montenegro number 56/92).



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                                     Government of Montenegro


   Bylaws: Decree on joint inspection monitoring, Decree on execution of inspection monitoring and
   other bylaws related to inspectors ID, manner of keeping records on executed inspections, content
   of inspection minutes and so on.
   Law on general administrative procedure, Law on public administration, Law on civil servants and
   employees and Decree on organization and manner of work of public administration.
Institutional framework
Market monitoring covers the control of goods and services in the market. In Montenegro, market
monitoring is carried out by competent ministries and administration bodies through inspectors
authorized for monitoring the application of regulations in accordance with the competencies
prescribed by special laws. In market surveillance procedure, inspectors have prescribed authorities
and obligations, at which they have at their disposal several administrative measures and actions, like:
   Order for elimination of established irregularities,
   Taking and submitting samples to authorized institutions for compliance appraisal analyses,
   As well as a series of other measures with the purpose of harmonizing market conditions with the
   regulations.
The monitoring bodies in Montenegro mutually cooperate, i.e. exchange information and carry out joint
monitoring when required, in accordance with the regulations on inspection monitoring.
Inspections competent for surveillance in certain areas
Market inspection is a department in the Ministry of Economic Development and it carries out the
monitoring of goods in the market, services in the circulation of goods and trading and other similar
services which have not been put under the supervision of another inspection body by special
regulations. Market monitoring in these areas covers:
   Satisfaction of conditions for carrying out of activities,
   Trading records,
   Product compliance with the requirements of quality and standards, marking and declaring
   products and accompanying technical documentation for technical products and consumer goods;
   Consumer protection, especially with regards to the protection of their economic interests,
   including the resolving of consumers’ complaints in case of deficits on products, as well as
   because of erroneously calculated price (complaint) exercising the rights from guarantees and so
   on,
   Protection of intellectual property rights (copyright and other similar rights and industrial property
   rights);
   Carrying out investigations in relation to competition protection and so on.
The market inspection of Montenegro is organized in four working sections, three of which in territorial
principle (regional units), with 63 employees, of whom there are 57 inspectors, with 4 of them
concurrently acting as coordinators of working sections. All inspectors have university degrees (27
Law school graduates, 21 graduated economists, 10 graduate engineers of agronomy, technology,
forestry). Market inspection is headed by Chief Market Inspector.
The Market Inspection still does not possess appropriate information system, which reduces the
possibility of monitoring data which would be of assistance for as good as possible risk assessment
and for as efficient as possible market monitoring.
Inspectors’ training: until now, the representatives of the Market Inspection, and in some cases all
market inspectors, have passed through several seminars and round tables, to the topics of quality
infrastructure, directives of new and old approach, directive on general product safety, consumer
protection, protection of intellectual property rights (CARDS, PLAC, TAIEX, USAID and APK-
Committee for the protection of intellectual property and others). The Market Inspection participates
even in the training conducted by Civil Servants Agency. The visit was organized to the Market
Inspection of Slovenia for the purpose of familiarizing with the organization of the inspection, its
operation and cooperation with other public bodies and institutions, as well as with the functioning of
the RAPEX and other aspects of general product safety in the market.


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The Sanitary Inspection and the Health Inspection are a section within the Ministry of Health,
Labour and Social Welfare and they perform market monitoring in the area of food safety, safety of
food of herbal origin following primary production, harmlessness of cosmetic products, toys,
detergents, chemicals, as well as conditions for performing healthcare activities, offering healthcare
services, circulation of drugs and medical devices, protection from communicable diseases, protection
from ionizing radiation and so on.
The Section for the activities of health-sanitary inspection has got the total of 37 employees - Chief
health-sanitary inspector who manages the health-sanitary inspection, 4 health inspectors and 1
sanitary inspector-coordinator. In eight regional units of the Health-sanitary inspection there are 32
sanitary inspectors. All inspectors have university degrees.
The Directorate for Drugs and Medical Devices is an administration body under the supervision of
the Ministry of Health, Labour and Social Welfare and it currently has 12 employees. The Directorate
is competent for the registration of drugs and medical devices and the control of the circulation of
drugs and medical devices.
The Veterinary inspection is a department of the Veterinary Directorate with 22 inspectors, Phyto-
sanitary agricultural Inspection is within the Ministry of Agriculture, Forestry and Water
Management with 20 inspectors who perform the monitoring over the circulation of food, animal
foodstuff, animals and products of animal origin, as well as seed material, agricultural plants, planting
material, fertilizers and plant protection substances and so on (see chapter 3.12. - 3.12.2. Veterinary
activity and 3.12.3. Phyto-sanitary measures).
The Tourism and Ecological Inspection are within the Ministry of Tourism and Environment
Protection. The Tourism Inspection performs the monitoring of tourism and hospitality services in the
market, as follows: conditions which must be met by the subjects who offer these services, placarding
the category of hospitality facility, sticking to established norms, announced service prices, prescribed
working hours, keeping guest books, complaint books, records of procurement and sale, advertising
these services and the protection of intellectual property rights in this area, as well as the control of the
restriction of the use of tobacco products in hospitality facilities and others. This inspection has got the
Chief Inspector and 17 inspectors, as well as 8 inspectors engaged by Minister’s authorization.
The Ecological Inspection performs the monitoring of the application of regulations from the field of
environment and other regulations, monitors ionizing and non-ionizing radiation (except in medical
purposes), carries out the control of radioactivity of all types of goods, as well as of the permissions for
import, export and transit of the sources of ionizing radiation and substances, which harm the ozone
layer, of products which contain such substances, including the non-hazardous waste. Besides legal
regulations, the Ecological inspection also applies internationally ratified agreements and conventions
– Vienna convention, Basel convention, Montreal protocol, CITES conventions and others. This
inspection has got the Chief Inspector and four inspectors, and all with university degree.
Beside these, the inspection is performed by other inspection bodies, within their competencies.
3.1.1.5.2. Short-term priorities
Legislation
The new Law on technical requirements for products and compliance appraisal with the prescribed
requirements (which will be the legal basis for the transposition of the directives of the new and old
approach and for the adoption of technical regulations) and the new Law on Standardization will be
harmonized with basic provisions of the Agreement on Technical Obstacles to Trade of the WTO (see
chapter 3.1.1.3. Compliance appraisal).
The Law on General Product Safety, will transpose the directives 2001/95 EC on general product
safety and 1987/357/EEC on products of deceiving appearance, as well as the Decree of the EC on
compliance with rules on product safety in case of products imported from the third countries
339/93/EEC. This Law will be related to products the safety of which is not covered, or not fully
covered by special regulations. It will contain the provisions on the principles and activities of market
monitoring (monitoring products in the market and undertaking appropriate measures), on cooperation

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and exchange of information between market monitoring bodies and other bodies in Montenegro, on
protection clause, on the legal basis for the cooperation with the bodies of the EU member states and
the establishing of the system of rapid exchange of information on dangerous consumer products
(RAPEX).
After the adoption of the Law on general safety of products, the Ministry of Economic Development,
i.e. the Government of Montenegro, will adopt the bylaws related to the content and procedure of
informing the competent inspection body by manufacturers and distributors, and to the exchange of
information among competent bodies in Montenegro and with the EC.
In the Fourth quarter of 2008, the Law will be adopted on the Amendments of the Law on Inspection
Monitoring, which will ensure the harmonization with the Constitution of Montenegro.
The Law of Health Inspection, which will be adopted in the Fourth quarter, will regulate the execution
of activities of health monitoring and health control over the work of healthcare institutions by health
inspectors. In the year 2009, the new Law will be adopted on Market Inspection, which will, pursuant
to the legislative framework, encompass total competencies of the Market Inspection, thus totally
separate the competences from other market inspection bodies. In such a way, possible positive and
negative conflict will be avoided with regards to competences of market inspection, which will
concurrently further contribute to the free flow of goods and market safety, as well as perform the
harmonization with the Constitution of Montenegro.
Other new laws that will be adopted are: Law on Tobacco and bylaws, Amendments of the Law on
drugs and bylaws, the bylaws for the implementation of the Law on Food Safety, the Amendments of
the Law on Restricting Use of Tobacco Products, Amendments of the Law on Tourism and bylaws,
Amendments of the Law on Agriculture and Rural Development, which comprise inspection monitoring
in these areas. The elaboration of other existing legislation is envisaged, as well as compliance
appraisal with the EU regulations, in order for the new and amended existing regulations from the field
of health-sanitary monitoring to be harmonized with the EU legislation.
Institutions
The Analysis is planned of the existing organization and personnel capacities of market monitoring
depending on that the need will be determined for reorganization and new employment. These and
other activities on further improvement of mutual cooperation between market monitoring bodies and
the institutions which deal with products compliance control will be the subject matter of Market
Monitoring Strategy, which will be adopted in the First quarter of 2009. The Strategy will cover the
analysis of the condition in market monitoring bodies and further activities on the improvement of the
organization of work, personnel capacities and equipping of inspections, with special emphasis on the
introduction of information system, and all of this with the purpose of raising the efficiency of market
monitoring in Montenegro and entire realization of its role in the function of high level of protection, i.e.
safety of products in the market and free flow of goods.
The activities will continue on training market inspectors by areas (by directives), according to a
special plan, with the exchange of experiences with the monitoring bodies in the EU member states.
Special preparation will be made of market inspectors for the use of software for the exchange of
information, including also the RAPEX system.
Technical equipping is planned of the Market Inspection with information equipment and appropriate
software, which will enable the networking of all Market Inspection offices in Montenegro, as well as at
the level of monitoring bodies and mutual connecting onto the database. The Market Inspection, within
the CARDS 2006 project, expects lap-top computers (60 units). The establishing of information
exchange system will be ensured at the level of Montenegro, and conditions will be prepared for the
cooperation and exchange of data at the level of the EU for the implementation of which expert
assistance is expected from the TRIM project of the EU.
The improvement is envisaged of the conditions of work of the Health-sanitary Inspection, as well as
the analysis of the existing organization and personnel capacities of this section, in order to undertake
measures for these two inspections to take their respective places in the public administration system.
The number of the employed in the Directorate for drugs and medical devices will be increased.
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The training of veterinary and phyto-sanitary inspectors will continue with the view of carrying out
inspection controls in line with the innovated national legislation and the EU standards. The training
will be carried out through workshops, seminars and expert visits to the inspection bodies of the EU
countries. It is necessary to improve the system of fast communication and exchange of data and to
procure additional equipment for adequate veterinary and phyto-sanitary control.


3.1.1.5.3. Employment plan
                                        Existing -                Planned number of employees
Institutions                                             2007
                                        planned                   2008     2009       2010    2011                2012
Ministry of Economic                    Existing         63       65       66         68      68                  70
Development - Market Inspection
Health-sanitary Inspection(Health       Existing         37       37         40           45         50           58
protection Sector)
Veterinary inspection                   Existing         22                         Chapter 3.12.2.7
Agricultural – Phyto-sanitary           Existing
                                                         20                          Chapter 3.12.4
Inspection
3.1.1.5.4. Financial requirements
Market inspection

                            2008              2009             2010                  2011                  2012
Budget                  € 1.128.000 *     1.240.800      1.364.880             1.501.400             1.651.500
Foreign support         € 100.000 **
*Covers gross salaries and other compensations of the employed, costs of trainings and other pecuniary expenses
**In the form of equipment: previously mentioned lap-top computers /CARDS/



Health-sanitary inspection
                         2008                2009             2010             2011                  2012
Budget                   € 756.551 *         832.000          936.000          1.029.600             1.194.336
Foreign support                              100.000**
* Covers gross salaries of the employed, continuous training of the employed, participation of a foreign
consultants.
** GTZ – Request for funds/assistance results from the component "Foreign trade and CEFTA". The conditions
of the project are for it to represent the support to the EU accession process, the improvement of economic
conditions and for it to be related to regional development.

3.1.2. OLD APPROACH DIRECTIVES
The legislation from the domain of the free movement and safety of industrial products, which within
the EU has been in principle divided on the directives of the old (sectoral) approach and the directives
of the new approach, in Montenegro covers the laws and bylaws adopted at the level of previous state
unions, which are still effective in Montenegro, as well as new national regulations, which are
gradually harmonized with the European law. Having in mind unique technical standards for all
member states, with the purpose of overcoming technical barriers and enabling free flow of goods, i.e.
single market and single economic area, there are plans in Montenegro to harmonize technical
legislation of Montenegro with the directives of the old and the new approach.
The backbone of the legislation in this area will be the new Law on technical requirements for products
and products compliance appraisal with the prescribed requirements, which will be adopted in the First
quarter of 2008. This Law will be a main legal basis for the adoption of bylaws by means of which
individual directives of the old and the new approach will be transposed.



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The Law on general products safety, which will also be adopted in the First quarter of 2008, will
transpose the directives 2001/95 EC on general products safety and 1987/357/EEC on products of
deceiving appearance, as well as the Decree of the EC on compliance with product safety rules in
case of products imported from the third countries 339/93/EEC. This Law will be related to the
products which are not covered by special regulations and which do not contain all aspects of
products safety (all risks). It will contain the provisions on market monitoring principles and activities
(monitoring products in the market and undertaking appropriate measures), on cooperation and
exchange of information between market monitoring bodies and other bodies in Montenegro, on
protection clause, on the legal basis for cooperation with the bodies of the EU member states and the
establishing of system of rapid exchange of information on dangerous consumer products (RAPEX).

3.1.2.1. Motor vehicles
3.1.2.1.1. Status
Having in mind the fact that the greatest number of regulations which deal with the technical
requirements for motor vehicles was adopted prior to the restoration of the independence of
Montenegro, thus not following technical progress to a sufficient degree, in the period to come the
activities will be directed towards the transposition of the EU directives from this field into the national
legislation.
Legislative framework
In this field, the following regulations are applied in Montenegro:
    Law on Standardization (Official Gazette of Montenegro number 13/08)
    Law on technical requirements for products, on product appraisal with prescribed requirements
    (Official Gazette of Montenegro number 44/08)
       Law on road transportation safety (Official Gazette of Republic of Montenegro number 72/05),
    which represents a legal basis for the adoption of technical regulations for motor vehicle devices
    and equipment.
    Law on taxation in road transportation (Official Gazette of Republic of Montenegro number 45/05)
    The International agreement on adoption of uniform conditions for homologation and mutual
    recognition of homologation of equipment and parts of vehicles. The Agreement was adopted in
    1958, together with 49 EC regulations and in Montenegro it is applied on the basis of the Decision
    on declaration of independence of Montenegro (Official Gazette of Republic of Montenegro
    number 36/06)
    Regulation on procedure of inspection of homologation and ecological orderliness of used motor
    vehicles during importation (Official Gazette of Republic of Montenegro number 42/04)
    Regulation on special conditions for vehicles of public transportation in road transport and
    transport for own needs (Official Gazette of Republic of Montenegro number 62/06).
Uniform regulations, which make integral part of the Agreement on accepting uniform conditions for
homologation and mutual recognition of homologation of equipment and parts of motor vehicles, which
were adopted by the Former Standardization Institute, are the following:
    Uniform regulations related to homologations of motor vehicle headlamps which emit asymmetric
    low beam and/or high beam equipped with the bulbs of R2 category (according to ECE R. 1)
    (Official gazette of the SFRY - supplement: International treaties and other agreements, number
    2/69), (harmonized with the directives 76/761/EEC, 89/517/EEC and 1999/17/EC)
    Uniform regulations related to homologation of electrical incandescent lamps for road headlamps
    which emit one asymmetric low beam and one road beam, or one or another of these beams
    (according to ECE R.2) (Official Gazette of the SFRY - supplement: International treaties and other
    agreements, number 2/69), (harmonized with the directives 76/761/EEC, 89/517/EEC and
    1999/17/EC)
    Uniform regulations related to homologation of reflective devices for motor vehicles and their
    trailers (according to ECE R.3), (Official Gazette of the SFRY-supplement: International treaties
    and other agreements, number 2/69), (harmonized with the directives 76/756/EEC, 97/29/EEC)


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Uniform regulations related to homologation of devices for illumination of motor vehicles back
number plate (excepting motorcycles) and their trailers (according to ECE R.4), (Official Gazette of
the SFRY-supplement: International treaties and other agreements, number 2/69), (harmonized
with the directives: 76/760/EEC, 97/31/EEC)
Uniform regulations related to homologation of motor vehicles Sealed beams, which emit
asymmetric low European beam or one high beam, or both beams (according to ECE R.5),
(Official Gazette of the SFRY-supplement: International treaties and other agreements, number
2/69), (harmonized with the directives: 76/761/EEC, 89/517/EEC and 1999/17/EC)
Uniform regulations related to homologation of turn signal lights for motor vehicles and their trailers
(according to ECE R.6) (Official Gazette of the SFRY-supplement: International treaties and other
agreements, number 2/69), (harmonized with the directives 76/759/EEC, 89/277/EEC and
1999/15/EC)
Uniform regulations related to homologation of motor vehicles front position lights, rear position
lights and break lamps (excepting motorcycles) and their trailers (according to ECE R.7) (Official
Gazette of the SFRY-supplement: International treaties and other agreements, number 2/69),
(harmonized with the directives: 76/758/EEC, 89/516/EEC and 97/30/EEC)
Uniform regulations related to homologation of motor vehicles main lamps which emit asymmetric
low or high beam or both and which are equipped with halogen bulbs (H1,H2 or H3) (according to
ECE R.8) (Official Gazette of the SFRY-supplement: International treaties and other agreements,
number 2/69), (harmonized with the directives: 76/761/EEC, 89/517/EEC and 1999/17/EC)
Uniform regulations related to homologation of three-wheeled vehicles in relation to noise
(according to ECE R.9) (Official Gazette of the SFRY number 16/72 – International treaties and
other agreements), (harmonized with the directives: 70/157/EEC, 73/350/EEC, 77/212/EEC,
81/334/EEC and 89/491/EEC)
Uniform regulations related to homologation of vehicles in relation to prevention of radio
disturbances (according to ECE R.10) (Official gazette of the SFRY number 16/72 – International
treaties and other agreements), (harmonized with the directives: 72/245/EEC, 89/491/EEC, 95/54/
EC)
Uniform regulations related to homologation of vehicles equipped with Otto or Diesel engines in
relation to emission of polluting gasses from engines - method for measuring power of Otto
engines - method for measuring fuel consumption (according to ECE R.15) (Official Gazette of the
SFRY number 57/75 – International treaties and other agreements), (harmonized with the
directives: 70/220/EEC, 74/290/EEC, 77/102/EEC, 78/665/EEC)
Uniform regulations related to homologation of safety belts for adults located in motor vehicles
(according to ECE R.16) (Official Gazette of the SFRY number 47/74 – International treaties and
other agreements), (harmonized with the directives: 77/541/EEC, 81/576/EEC, 82/319/EEC,
90/628/EEC, 96/36/EC, 2000/3/EC)
Uniform regulations related to homologation of vehicles in relation to firmness of seats and their
fixing, as well as in relation to features of head support, which can be built-into such seats
(according to ECE R.17) (Official Gazette of the SFRY number 47/74 – International treaties and
other agreements), (harmonized with the directives: 74/408/EEC, 81/577/EEC, 96/37/EC)
Uniform regulations related to homologation of motor vehicles fog-lights (according to ECE R.19)
(Official Gazette of the SFRY number 14/75 – International treaties and other agreements),
(harmonized with the directives: 76/762/EEC, 1999/18/EC)
Uniform regulations for examination and conducting mandatory vehicle homologation with regards
to locks and door fixing devices (according to ECE R.11) (Official gazette of the SFRY number
59/90 – International treaties and other agreements), (harmonized with the directives: 70/387/EEC,
98/90/EC, 2001/31/EC)
Uniform regulations for examination and conducting mandatory homologation of motor vehicles in
relation to breaking (according to ECE R.13) (On the basis of the Order on mandatory
homologation, Official Gazette of the SFRY number 54/85, 26/89), (harmonized with the directives:
71/320/EEC, 74/132/EEC, 75/524/EEC, 79/489/EEC, 85/647/EEC, 88/194/EEC, 91/422/EEC,
98/12/EEC)


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   Uniform regulations for examination and conducting mandatory homologation of motor vehicles
   with regards to safety belts attachments in passenger vehicles (according to ECE R.14) (On the
   basis of the Order on mandatory homologation, Official Gazette of the SFRY number 4/85),
   (harmonized with the directives: 76/115/EEC, 81/575/EEC, 82/318/EEC, 90/629/EEC)
   Uniform regulations for examination and conducting of mandatory homologation of motor vehicles
   in relation to protection from unauthorized use (according to ECE R.18) (On the basis of the Order
   on mandatory homologation, Official Gazette of the SFRY numbers 11/85, 1/87, 23/88),
   (harmonized with the directives: 74/61/EEC, 95/56/EEC)
   Uniform regulations for examination and conducting mandatory homologation of motor vehicles
   with regards to their internal equipment (according to ECE R.21) (On the basis of the Order on
   mandatory homologation, Official Gazette of the SFRY number 70/90), (harmonized with the
   directives: 74/60/EEC, 78/632/EEC, 2000/4/EC)
   Uniform regulations for examination and conducting mandatory homologation of protective helmets
   for riders of bicycles with engine and of motorcycles and for passengers on such vehicles
   (according to ECE R.22) (On the basis of the Order on mandatory homologation, Official Gazette
   of the SFRY number 18/88)
   Uniform regulations for examination and conducting mandatory homologation of motor vehicles
   reversing lamps and their trailers (according to ECE R.23) (On the basis of the Order on
   mandatory homologation, Official Gazette of the SFRY number 59/90), (harmonized with the
   directives: 77/539/EEC, 97/32/EC)
   Uniform regulations for examination and conducting mandatory homologation: I Diesel engines in
   relation to visible polluting gasses; II motor vehicles in relation to fitting homologated engine; III
   motor vehicles equipped with diesel engines with regards to visible pollution gasses; IV uniform
   regulations for measuring power of Diesel engine (according to ECE R.24) (On the basis of the
   Order on mandatory homologation, Official Gazette of the SFRY number 11/85, 1/87),
   (harmonized with the directives: 72/306/EEC, 89/491/EEC )
   Uniform regulations for examination and conducting mandatory homologation of head supports on
   motor vehicles seats (according to ECE R.25) (On the basis of the Order on mandatory
   homologation, Official Gazette of the SFRY number 59/90), (harmonized with the directive: 78/937/
   EC)
   Uniform regulations for examination and conducting mandatory homologation in relation to their
   external exhausts (according to ECE R.26) (On the basis of the Order on mandatory
   homologation, Official Gazette of the SFRY number 70/90), (harmonized with the directives:
   74/483/EEC, 79/488/EEC, 87/354/EC)
   Uniform regulations for examination and conducting mandatory homologation of passenger vehicle
   tyres and their trailers (according to ECE R.30) (On the basis of the Order on mandatory
   homologation, Official Gazette of the SFRY number 43/83), (harmonized with the directive: 92/23/
   EEC)
   Uniform regulations for examination and conducting mandatory homologation of vehicles in
   relation to distribution of night-time commands (according to ECE R.35) (On the basis of the Order
   on mandatory homologation, Official Gazette of the SFRY number 59/90)
   Uniform regulations for examination and conducting mandatory homologation of incandescent
   bulbs for motor vehicles and their trailers (according to ECE R.37) (On the basis of the Order on
   mandatory homologation, Official Gazette of the SFRY number 4/85), (harmonized with the
   directives: 76/761/EEC, 89/517/EEC, 1999/17/EC)
   Uniform regulations for examination and conducting mandatory homologation of rear fog-lights for
   motor vehicles and their trailers (according to ECE R.38) (On the basis of the Order on mandatory
   homologation, Official Gazette of the SFRY number 59/90), (harmonized with the directives:
   77/538/EEC, 89/517/EEC, 1999/14/EC)
   Uniform regulations for examination and conducting mandatory homologation of vehicles in
   relation to speedometer and its fitting into vehicle (according to ECE R.39) (On the basis of the
   Order on mandatory homologation, Official Gazette of the SFRY number 11/85, 1/87),
   (harmonized with the directives: 75/443/EEC, 97/39/EC, 2000/7/EC)


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Uniform regulations for examination and conducting mandatory homologation of motorcycles with
Otto engines with regards to emission of polluting gasses from engines (according to ECE R.40)
(On the basis of the Order on mandatory homologation, Official Gazette of the SFRY number
60/86)
Uniform regulations for examination and conducting mandatory homologation of motorcycles in
relation to noise (according to ECE R.41) (On the basis of the Order on mandatory homologation,
Official Gazette of the SFRY number 60/86), (harmonized with the directives: 78/1015/EEC, 87/56/
EEC, 89/235/EEC)
Uniform regulations for examination and conducting mandatory homologation of motorized security
glasses and materials for their fitting onto motor vehicles and their trailers (prema ECE R.43) (On
the basis of the Order on mandatory homologation, Official Gazette of the SFRY 68/85),
Uniform regulations for examination and conducting mandatory homologation of bicycles with Otto
engines in relation to emission of polluting gasses from engine (according to ECE R.47) (On the
basis of the Order on mandatory homologation, Official Gazette of the SFRY number 60/86)
Uniform regulations for examination and conducting mandatory homologation of vehicles with
regards to fitting lighting and light-signalling devices (according to ECE R.48) (On the basis of the
Order on mandatory homologation, Official Gazette of the SFRY number 68/85, 1/87, 46/87),
(harmonized with the directives: 76/756/EEC, 80/233/EEC, 82/244/EEC, 83/276/EEC, 84/8/EEC,
89/278/EEC, 91/663/EEC, 97/28/EEC)
Uniform technical conditions on examination and conducting homologation diesel engines and
natural gas engines (NG) as well as Otto LPG engines (LPG) and vehicles equipped with diesel
engines on NG and Otto engines on LPG, in relation to emission of pollutants from engines
(according to ECE R.49) (On the basis of the Order on homologation, Official gazette of the FRY
number 60/02, 64/02), (harmonized with the directives: 88/77/EEC, 1999/96/EC)
Uniform regulations for examination and conducting mandatory homologation of front position
lights, rear position lights, breaking lamps, turn lights and rear number plate lights for bicycles with
engine, motorcycles and vehicles considered as such (according to ECE R.50) (On the basis of
the Order on homologation, Official gazette of the SFRY number 67/86)
Uniform regulations for examination and conducting mandatory homologation of motor vehicles
with at least four wheels in relation to noise (according to ECE R.51) (On the basis of the Order on
mandatory homologation, Official Gazette of the SFRY numbers 48/84, 1/87), (harmonized with
the directives: 70/157/EEC, 81/334/EEC, 84/424/EEC, 89/491/EEC, 92/97/EEC, 96/20/EC,
1999/101/EC)
Uniform regulations for examination and conducting of mandatory homologation of motorcycles in
relation to fitting of lighting and signalling devices (according to ECE R.53) (On the basis of the
Order on mandatory homologation, Official Gazette of the SFRY number 68/85), (harmonized with
the directive: 93/92/EEC)
Uniform regulations for examination and conducting mandatory homologation of commercial
vehicles tyres and their trailers (according to ECE R.54) (On the basis of the Order on mandatory
homologation, Official Gazette of the SFRY number 11/85), (harmonized with the directive: 92/23/
EEC)
Uniform regulations for examination and conducting mandatory homologation of mechanical
coupling components of combinations of vehicles (according to ECE R.55) (On the basis of the
Order on mandatory homologation, Official Gazette of the SFRY number 63/89)
Uniform regulations for examination and conducting mandatory homologation of lamps for bicycles
with engine and vehicles treated as such (according to ECE R.56) (On the basis of the Order on
mandatory homologation, Official Gazette of the SFRY number 67/86)
Uniform regulations for examination and conducting mandatory homologation of lamps for
motorcycles and vehicles treated as such (according to ECE R.57) (On the basis of the Order on
mandatory homologation, Official Gazette of the SFRY number 68/85)
Uniform regulations for examination and conducting mandatory homologation of: I rear protective
devices, II vehicles in relation to fitting of rear protective devices, which have type homologation; III
vehicles in relation to protection of rear side (according to ECE R.58) (On the basis of the Order on


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   mandatory homologation, Official Gazette of the SFRY number 85/87), (harmonized with the
   directives: 70/221/EEC, 79/490/EEC, 97/19/EC)
   Uniform regulations for examination and conducting mandatory homologation of replaceable
   silencing systems for noise reduction (according to ECE R.59) (On the basis of the Order on
   mandatory homologation, Official Gazette of the FRY number 43/92), (harmonized with the
   directives: 81/334/EEC, 89/491/EEC, 96/20/EC, 1999/101/EC)
   Uniform regulations for examination and conducting mandatory homologation of bicycles with
   engine, with regards to noise (according to ECE R.63) (On the basis of the Order on mandatory
   homologation, Official Gazette of the SFRY number 73/87)
   Uniform regulations for examination and conducting mandatory homologation of motor vehicles in
   relation to measuring maximum speed (according to ECE R.68) (On the basis of the Order on
   mandatory homologation, Official Gazette of the FRY number 17/92)
   Uniform regulations for examination and conducting homologation of plates for marking slow
   vehicles (by construction) and their trailers, which are mounted at the rear side of vehicles and
   their trailers (according to ECE R.69) (On the basis of the Order on mandatory homologation,
   Official Gazette of the SFRY number 24/90)
   Uniform regulations for examination and conducting mandatory homologation of plates for marking
   heavy and other vehicles, which are mounted at the rear side of vehicles (according to ECE R.70)
   (On the basis of the Order on mandatory homologation, Official Gazette of the SFRY number
   24/90)
   Uniform regulations for examination and conducting mandatory homologation of goods vehicles,
   trailers and semi-trailers in relation to lateral protection (according to ECE R.73) (On the basis of
   the Order on mandatory homologation, Official Gazette of the FRY number 43/92), (harmonized
   with the directives: 89/297/EEC)
   Uniform regulations for examination and conducting mandatory homologation of bicycles with
   engine and motorcycles with regards to breaking (according to ECE R.78) (On the basis of the
   Order on mandatory homologation, Official Gazette of the SFRY number 17/89), (harmonized with
   the directive: 93/14/EEC)
   Uniform technical conditions for examination and conducting homologation of vehicles in relation to
   emission of pollutants from fuel (according to ECE R.83) (On the basis of the Order on mandatory
   homologation, Official Gazette of the FRY number 61/02), (harmonized with the directives: 70/220/
   EEC, 83/351/EEC, 88/76/EEC, 88/436/EEC, 89/491/EEC, 91/441/EEC, 94/12/EC, 96/69/EEC,
   98/69/EC, 98/77/EC, 1999/102/EC, 2001/1/EC)
   Uniform regulations for examination and conducting mandatory homologation of motor vehicles
   equipped with internal combustion engines in relation to measuring fuel consumption (according to
   ECE R.84) (On the basis of the Order on mandatory homologation, Official Gazette of the FRY
   number 24/92), (harmonized with the directives 80/1268/EEC, 89/491/EEC, 93/116/EC, 1999/100/
   EC)
   Uniform regulations for examination and conducting mandatory homologation of internal
   combustion engines used for driving motor vehicles of M and N category in the sense of
   measuring net power (according to ECE R.85) (On the basis of the Order on mandatory
   homologation, Official Gazette of the SFRY number 12/92), (harmonized with the directives
   80/1269/EEC, 88/195/EEC, 89/491/EEC, 97/21/EC, 1999/99/EC)
   Uniform technical conditions on examination and conducting mandatory homologation of vehicles
   intended for the transport of dangerous materials in relation to their specific construction features
   (according to ECE R.105) (On the basis of the Order on mandatory homologation, Official Gazette
   of the FRY number 48/02), (harmonized with the directive 98/91/EC)
   Uniform technical conditions on examination and conducting homologation of motor vehicle lamps
   which emit asymmetric high beam or low beam or both, equipped with incandescent bulbs
   (according to ECE R.112) (On the basis of the Order on mandatory homologation, Official Gazette
   of the FRY number 46/02)
   Uniform regulations for examination and conducting mandatory homologation of acoustic warning
   devices, as well as motor vehicles with regards to acoustic signals (according to ECE R.28) (On


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   the basis of the Order on mandatory homologation, Official Gazette of the SFRY number 60/86)
   (harmonized with the directive 70/388/EEC )
   Order for vehicles which for international road transport must have a certificate on meeting
   technical requirements in relation to noise and emission of pollutants (Official Gazette of the FRY
   number 27/92).
Also, with the purpose of greater degree of environment protection, the Decision was passed on
conditions which all imported used vehicles must fulfil (Official Gazette of the Republic of Montenegro
number 44/07), which amongst other things introduced as mandatory EURO 3, as minimum standard,
which is related to exhaust emission of vehicles and the level of noise. This Decision transposed into
national legislation the following EU directives: 70/220/EEC, 98/69/EC, 88/77/EEC, 1999/96/EC,
96/20/EEC and 70/157/EEC, which correspond to the Regulations UN/ECE.
Institutional framework
It turns out that the competence for the adoption of technical regulations for motor vehicles devices
and equipment, pursuant to the Decree on determining bodies which take over the competencies of
bodies from the Law on Technical Requirements for products and products compliance appraisal with
the prescribed requirements (Official Gazette of the Republic of Montenegro number 56/06), lies within
those ministries which deal with the matter regulated by technical regulations.
With the Decision on establishing the Standardization Institute of Montenegro (Official Gazette of the
Republic of Montenegro number 21/2007) the Institute was established for the realization of
standardization objectives and adoption of Montenegrin standards and similar documents. The Article
4, paragraph 1 of the stated Decision, amongst other things, the Institute was entrusted with the
competence to adopt, develop, re-examine, amend and withdraw Montenegrin standards and similar
documents, as well as to give basis for drafting technical regulations. Accordingly, pursuant to the
Article 4, paragraph 1, item 15 of the same Decision, the Institute secures the compliance of
Montenegrin standards and similar documents with European and international ones. The Institute is
obliged to prepare the basis for the drafting of subject technical regulations.
3.1.2.1.2. Short-term priorities
Legislation
The Law on technical requirements for products and products compliance appraisal with the
prescribed requirements and the Law on Standardization are the basis for the adoption of standards
and technical regulations, amongst other things for motor vehicles. The Ministry of Economic
Development is competent for their preparation. These laws will be adopted in the First half of 2008.
The Regulation on the manner of checking the compliance with conditions, form and content of the
certificates and the amount of compensation for the imported used motor vehicles will be adopted in
the Second quarter of 2008.
It is envisaged for the harmonization in the field of motor vehicles of M, N, O category (vehicles with at
least 4 wheels) and L category (vehicles with 3 or 4 wheels) to be achieved by means of the adoption
of national regulations.
With the purpose of achieving greater degree of harmonization of national regulations related to motor
vehicles, the Fourth quarter of 2008 will see the adoption of the new Regulation on dimensions, total
masses and vehicle axial loads and on elementary conditions that must be met by the devices and
equipment in those vehicles in road traffic. The stated Regulation will be fully compliant with the EU
directives from this area.
Institutions
The establishing of a working group is planned consisting of the representatives of ministries and
institutions within the scope of competencies of which is technical legislation in this field, which
working group will be composed of the members coming from the Ministry of transportation, maritime
affairs and telecommunications, the Ministry of internal affairs, the Ministry of economic development,


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the Standardization Institute and the Mechanical Engineering Faculty which will work on harmonization
of technical legislation related to motor vehicles with the directives of the European Union in this field.
During 2008 and 2009, the strengthening of administrative capacities will continue, as well as in the
sector of road traffic with the Ministry of Transportation, Maritime Affairs and Telecommunications and
the Ministry of Interior, and also with the Standardization Institute of Montenegro, which will contribute
to more efficient adoption and implementation of regulations in this field, as well as to the
harmonization of national regulations with the EU regulations.




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3.1.2.1.3. Mid-term priorities
Legislation
Within the framework of mid-term activities, further continuation is planned of the process of
harmonization of the national legislation in the area of technical and road safety legislation,
transposition of the EU directives into legal documents and bylaws.
In that way, the regulations which are not sufficiently harmonized with the EU legislation will be made
ineffective, and replaced by the EU acts which will transpose the relevant EU directives which deal
with the issue of motor vehicles.
Also, with the purpose of the greatest possible degree of environment protection, the adoption is
planned of the new Decision on the conditions which must be met by imported motor vehicles, by
means of which environment protection and people’s health conditions will be considered fulfilled if a
vehicle is equipped with the engine of EURO 4 minimum standard, and which will thus transpose into
the national legislation the Directive 2005/55 EC (related to the approximation of the legislations of the
member countries with regards to the measures that need to be undertaken against the emission of
gasses and solid particles from Diesel engines used in vehicles and the emission of gasses and
pollutants from Otto engines (petrol driven) - OJ, L 275, 20.10.2005., page 1) related to exhaust
emission of vehicles and the level of noise from vehicles. By adopting such regulation the obligation
will be fulfilled from the Joint Declaration which accompanies the Protocol IV, which provides for the
obligation of meeting the EURO 4 standard for engines used in the vehicles for heavy cargo.
Employment plan

                                 Existing -                         Planned number of employees
           Institution                          2007
                                 planned                    2008      2009       2010     2011      2012
   MTMT – Road and Air
                                  Existing        6          7         9            13     14           14
    transportation sector
  Transportation Directorate      Existing        40         40        61           64     64           64


Financial requirements of MTMT – Transportation Directorate

                         2008         2009               2010                2011                2012
  Budget            24.183.626     25.876.480          27.687.834          29.625.982       31.699.801

3.1.2.2. Chemicals
3.1.2.2.1. Status
Legislative framework
The Law on chemicals (Official Gazette of the Republic of Montenegro number 11/2007) is the first law
in this field in Montenegro. The Law determines the procedure of reporting and putting into circulation
new and existing chemicals, the procedure of appraisal and assessment of risk from chemicals,
classification, packing and marking chemicals, import and export, and other issues relevant for the
protection of life and health of people and for environment protection. The Law has been harmonized
with the EU legislation, related to this matter, as well as with the competition rights standards.
Institutional framework
The Ministry of Health, Labour and Social Welfare is competent for the field of chemicals and the
implementation of the Law on chemicals. Within the framework of the Health Protection Sector, which
gives opinion on regulations from the field of health protection, i.e. one employee from the Health
Protection Department, works on issuing approvals for the transport of poisonous substances.


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The Department for the activities of the Health-sanitary Inspection within the framework of the Health
Protection Sector, beside other activities, performs the control over the production and circulation of
drugs and poisonous substances. The inspection monitoring within the competence of the Ministry is
carried out by the Sanitary Inspection in accordance with the law which establishes inspection
monitoring. In total, 13 sanitary inspectors are engaged, beside other competencies (import of food
and objects of general use, control over the means and passengers in international transportation,
etc.), on the activity of monitoring the import of chemicals, as well.
The Public Institution Centre for Eco-toxicological Researches of Montenegro is an institution
(Decision on establishing the Public Institution Centre for Eco-toxicological Researches of
Montenegro, Official Gazette of the Republic of Montenegro number 40/96) which performs the
activities of public interest. The activity of the Centre covers the conducting of eco-toxicological
researches of all segments of environment, i.e. air, water, sea, land, flora and fauna, climatic changes,
ionizing and non-ionizing radiation, noise and vibration, as well as the drafting of special toxicological
studies, analyses and programmes for the need of public bodies, scientific-research institutions and
enterprises and other subjects. In the Centre, there are 62 permanently employed people.
3.1.2.2.2. Short-term priorities
Legislation

   Regulation on conditions and principles and manner of classification, packing and marking
   chemicals (in accordance with the Article 37 of the Law on chemicals) – in the Third quarter of
   2008.
   Regulation on restriction and ban of chemicals in the market, in the Third quarter of 2008.
   Law on ratification of the Rotterdam Convention, in the Fourth quarter of 2008.
   Regulation on PIC procedure - Prior Consent Procedure, model import-export license form, (in
   accordance with the Rotterdam Convention, in the Fourth quarter of 2008)
   National chemical security programme will be adopted in the Second quarter of 2009 in
   accordance with the Article 77, paragraph 2 of the Law on chemicals, for the period of four years
   having in mind the SAICM Overarching Policy Strategy. It is based on the assessment of
   conditions and perceiving the problems of managing chemicals. The National Programme defines
   mid-term and long-term strategic national objectives and priority tasks in all areas of chemical
   security.
   Regulation on procedure of reporting new chemical, in the First quarter of 2009.
   Regulation on kinds, content, risk assessment and manner of keeping the List of existing and
   priority existing chemicals, the Second quarter of 2009
   Law on biocides, in accordance with the Directive 31998L0008, will be adopted in the Third quarter
   of 2009.
Institutions
The Ministry of Health, Labour and Social Welfare is competent for the adoption of the planned
regulations, with the prior approval of the Ministry of Tourism and Environment Protection.
The Council for the safe management of chemicals will be established in the First quarter of 2009, in
accordance with the Article 77, paragraph 1 of the Law on Chemicals. In accordance with the Articles
64 and 65 of the Law on chemicals, the Council is established for the purpose of giving proposals for
making decisions on expert issues and for expert assistance in decision making procedure and the
preparation of regulations from the area of chemicals. The Council for the management of chemicals
will perform the advisory activities related to the drafting of the National Chemical Safety Programme,
exchange of information in relation to chemical safety at the national and international level and
proposing solutions and conducting activities in the area of chemical safety.
It is necessary to authorize laboratories (Public Institution Centre for Eco-toxicological Researches of
Montenegro) for the appraisal of chemicals and risk assessment, in the First quarter of 2009, in
accordance with the Article 73 of the Law on chemicals.

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3.1.2.2.3. Mid-term priorities
Legislation
In the mid-term period, from 2010 to 2012, the following regulations will be adopted:
    Regulation on inspection and verification of DLP, in the First quarter of 2010.
    Regulation on procedure, methodology and principles of appraisal of chemicals and risk
    assessment, in the Third quarter of 2010.
    Amendments of the law on chemicals will be adopted in the Third quarter of 2011, for the purpose
    of harmonization with the new REACH (Registration, Evaluation, Authorisation and Restriction of
    Chemicals establishing a European Chemicals Agency ... -32006R1907).
Institutions
The responsibility for the realization of the stated activities lies within the Ministry competent for health
issues, as well as a public administration body responsible for environment protection activities.
The establishing of, training for and managing of the information system for chemicals within the
framework of the Ministry of Health, Labour and Social Welfare are all the activities planned for the
First quarter of 2011.
3.1.2.2.4. Employment plan

     Institution        Existing - planned       2007                  Planned number of employees
                                                               2008       2009       2010       2011       2012
 MHLSW – Health
                             Existing               1            2          2          2         2          2
 Protection Sector
    Chemicals
   Management                Planned                -            7          7          7         7          7
     Council
Note: Budgetary user (Department for the activities of the Health-sanitary Inspection within the framework of the
Health Protection Sector) is covered in Chapters 3.1.2.4, 3.1.2.5. and 3.1.3.3.


3.1.2.2.5. Financial requirements

                           2008              2009             2010              2011                2012
Budget                 115.000          78.000            65.400          73.000              57.600
Foreign support        12.400           20.900            16.000          18.900              21.800
Note: Budgetary user (Department for the activities of the Health-sanitary Inspection within the framework of the
Health Protection Sector) is covered in Chapters 3.1.2.4, 3.1.2.5. and 3.1.3.3.

3.1.2.3. Pharmaceuticals
3.1.2.3.1. Status
Legislative framework
The National Legal Framework related to pharmaceuticals covers the Law on drugs and several other
bylaws.
The Law on Drugs (Official Gazette of the Republic of Montenegro 80/ 2004) was adopted with the
purpose of setting health protection standards in the field of drugs which correspond to the European
ones, as well as with the purpose of ensuring to the pharmaceutical industry and other participants in
health protection and circulation of drugs better conditions for development and competitiveness. The
Law has ensured the framework where in the process of production, circulation, distribution and
quality control hugh quality, safe and efficient drugs will be ensured as a prerequisite for high quality
and safe health protection.

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The Regulation on detailed conditions for issuing permits for putting drugs into circulation (Official
Gazette of the Republic of Montenegro number 54/06) regulating conditions, manner and procedure of
issuing permits for putting drugs into circulation. It has been established what is a minimum content of
the request for putting drugs into circulation in relation to administrative data, pharmaceutical-
biological data, pharmacological-toxicological and clinical data.
The Decree on criteria for determining maximum prices of drugs is also applied in this area (Official
Gazette of the republic of Montenegro number 50/07).
The Law on drugs and bylaws are partly harmonized with the EU law in this area.
Institutional framework
For the policy of drugs and medical devices the competence lies within the Ministry of Health, Labour
and Social Welfare, the Ministry of Agriculture and Veterinary Activity and Directorate for Drugs and
Medical Devices.
The Directorate for Drugs and Medical Devices was established in November 2006, on the basis of
the Decree on amendments of the Decree on organization and manner of work of public
administration (Official Gazette of the Republic of Montenegro 72/06). The organizational structure of
the Directorate consists of 2 sectors, general affairs service and department for information system.
There are currently 10 employees, and the Regulation on systematization envisaged 27 employees.
3.1.2.3.2. Short-term priorities
Legislation
The Strategy of policy from the area of drugs will be adopted in 2008. The Strategy will define the
condition in the area of drugs and medical devices, objectives, priorities and the manner of
achievement of the same, necessary resources for efficient conducting of rules on drugs and medical
devices, their safety, quality and efficiency, as well as accessibility. The ultimate objective is full
harmonization of the conditions for the circulation of drugs and medical devices with the Acquis and
the efficient implementation of these rules through the functionality of an independent competent body
in order to enable efficient policy in the field of quality, safety and efficiency of drugs and medical
devices.
The adoption of the amendment of the Law on drugs, which is planned for the second quarter of 2008,
will enable the establishing of a fully independent regulatory Agency for drugs.
During 2008 and 2009, the following bylaws will be adopted:
   Regulation on clinical testing of drugs for use in human medicine with the elements of good clinical
   practice in clinical testing of drugs
   Supplement 1, request for approving clinical testing/report of clinical testing
   Supplement 2, request for approving amendments of clinical testing
   Supplement 3, report on unwanted effect of drugs being tested
   Supplement 4, information on the completion of clinical testing
   Regulation on clinical testing of veterinary drugs with the elements of good clinical practice in
   clinical testing of veterinary drugs
   Supplement 1, request for approving clinical testing/report of clinical testing
   Supplement 2, request for approving amendments of clinical testing
   Supplement 3, report on unwanted effect of drugs being tested in veterinary medicine
   Supplement 4, information on the completion of clinical testing
   Regulation on drugs marking
   Regulation on information on drugs and drugs marketing
   Regulation on the type, scope and manner of pharmaceutical-chemical-biological and
   microbiological (analytical) testing of drugs for veterinary use
   Regulation on the type, scope and manner of pharmaceutical-chemical-biological and
   microbiological (analytical) testing of drugs for use in human medicine
   Regulation on drugs quality control

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   Regulation on pharmacological-toxicological testing of drugs
   Regulation on pharmacological-toxicological testing of drugs for use in veterinary medicine
   Regulation on conditions which must be met by drugs manufacturers
   Regulation on conditions which must be met by legal entities which carry out the wholesale
   circulation of drugs
   Regulation on pharmaco-vigilance
   Regulation on drugs importation
   Regulation on traditional herbal drugs
   Supplement 1, request for the acquisition of permit for putting into circulation a traditional/herbal
   drug
   Supplement 2, request for the renewal of permit for putting into circulation a traditional/herbal drug
   Supplement 3, request for reporting changes for traditional/herbal drug
   Supplement 4, request for the expiry of permit for putting a traditional drug into circulation
   Supplement 5, request for the transfer of permit for putting a traditional/herbal drug into circulation
   Regulation on homeopathic drugs
   Supplement 1, request for the acquisition of permit for putting a homeopathic drug into circulation
   Supplement 2, request for the renewal of permit for putting a homeopathic drug into circulation
   Supplement 3, request for reporting changes for homeopathic drug
   Supplement 4, request for the expiry of permit for putting a homeopathic drug into circulation
   Supplement 5, request for the transfer of permit for putting a homeopathic drug into circulation
Institutions
The Drugs Directorate employs expert staff from the field of pharmacy, medicine and dentistry, and
there is the ongoing procedure of employing veterinary experts. For the optimum work of the
Directorate, i.e. for the execution of a narrowly specialist programme, it is necessary to train specialist
personnel from the field of drugs quality control, technology, clinical testing, establish pharmaco-
vigilance system. It is also necessary to train members of commissions and external experts in relation
to new regulatory conditions for drugs and medical devices in circulation.
Priorities in this period are:
Installation and development of specific information system.
Strengthening the inspection sector in the Ministry of Health and Drugs Directorate, especially in the
field of production control, i.e. respecting good manufacturing practice, good practice in distributing
and storing of drugs, laboratory control, and inspection monitoring of clinical testing.
Permanent training of the employees in the Drugs Directorate and the Ministry of Health through the
programmes and projects, which will be organized by the Civil Servants Agency of Montenegro and
other institutions.
3.1.2.3.3. Mid-term priorities
In the period until 2012, the harmonization will continue of the legal provisions and bylaws with the
amendments of the EU directives. There are also plans to change the legal status of the Drugs
Directorate into the Drugs Agency, which comprises the status of a legal entity with gyro-account and
funding from own sources.
In relation to the status of the Directorate which is financed from the state budget, the Drugs Agency
will be independent and autonomous. By 2010 it is planned to introduce the quality system for the
Agency for drugs and medical devices.




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3.1.2.3.4. Employment plan

                                   Existing -                            Planned number of employees
          Institution                              2007
                                   planned                    2008          2009     2010       2011       2012
 MHLSW – Drugs Directorate          Existing        10         27            33       0          0             0
        Drugs Agency                Planned          0          0            0        40         45            50
3.1.2.3.5. Financial requirements

                                  2008              2009              2010           2011               2012.
         Budget               522.048,30        400.547,70              -              -                   -
   Own funds – Drugs
                                    -                 -             485.257,00     564.386,50         643.996,00
        Agency
    Foreign support:          200.000,00        160.000,00          130.000,00     100.000,00          80.000,00
Note: Budgetary funds cover the drafting of bylaws, permanent training of employees and participation of foreign
consultants.
As for Foreign support, the following have been planned Council of Europe Development Bank, European Bank
for Reconstruction, Twining programme and World Bank Loan.
3.1.2.4. - 3.1.2.8. Cosmetic products, detergents, glass, textile and wood
In the field covered by the directives of the old approach for cosmetic products, detergents, glass,
textile, footwear and wood, Montenegro applies the laws and bylaws adopted in Montenegro in
previous period (FRY, Serbia and Montengro) and they are generally related to safety of food and
general consumption objects but they are not harmonized with the EU law. In Montenegro, in 2007,
the Law on food safety was adopted (Official Gazette number 14/07), and for other products there are
plans to adopt the Law on technical requirements for products and products compliance appraisal
with the prescribed requirements in the First quarter of 2008. This Law will be harmonized with the so
called notification directive, 98/34/EC, and on the basis of the Law, appropriate bylaws for certain
products will be adopted, which will be harmonized with the relevant regulations of the Acquis. Also,
the First quarter of 2008 will see the adoption of the Law on general products safety, which will
regulate the safety of all products that are not covered by any directive, either of old or new approach.
Legislative framework
The survey of effective regulations which are partly related to cosmetic products, detergents, glass,
textile, footwear and wood:
Law on health safety of food and objects of general use (Official Gazette of the FRY, 37/02) and
bylaws adopted pursuant to this law:
    Regulation on conditions related to health safety of objects of general use which can be put into
    circulation (Official Gazette of the SFRY number 18/91);
    Regulation on conditions related to expert personnel, premises and equipment which Healthcare
    and other organizations that perform analyses and super-analyses of food and objects of general
    use must meet (Official Gazette of the FRY number 60/02);
    Instruction on manner of taking samples for performing analyses and super-analyses of food and
    objects of general use (Official Gazette of the SFRY number 60/1978);
    Regulation on methods for determining Ph-values and quantity of toxic metals and non-metals in
    personal hygiene products, in products for care and beauty of face and body and for determining
    micro-biological safety of such products (Official Gazette of the SFRY number 46/1983);
Law on health monitoring over food and objects of general use (Official Gazette of Serbia and
Montenegro number 4/88) and the bylaws adopted in accordance with this law:




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   Regulation on conditions and manner of testing food and objects of general use during their
   production and manner of keeping records on performed tests (Official Gazette of the Socialist
   Republic of Montenegro, number 8/75);
   Regulation on special working clothes and footwear of persons in the production and circulation
   who come into direct contact with food and persons who work in the production and circulation of
   personal hygiene products, care and beauty of face and body (Official Gazette of the Socialist
   Republic of Montenegro, number 16/80);
Law on protecting population from communicable diseases (Official Gazette of the Republic of
Montenegro number 32/05) and bylaws:
   Decision on manner of performing mandatory health checks of certain categories of employees,
   other persons and carriers of communicable diseases (Official Gazette of the FRY, number 27/97);
   Regulation on type and extent of health checks of employees who are subject to health monitoring,
   and of carriers of certain communicable diseases (Official Gazette of the Socialist Republic of
   Montenegro, number 3/89).
Institutional framework
The Ministry of Health, Labour and Social Welfare – Health Protection Sector, with the Health-sanitary
Inspection being the integral part of the same, is competent for the area of health safety and
inspection monitoring in the area which includes cosmetic products and detergents.
The Ministry of Economic Development is competent, on the basis of the Law on technical
requirements for products and products compliance appraisal with the prescribed requirements, to
adopt appropriate bylaws, i.e. regulations related to textile, glass, footwear and wood, which the same
Ministry is also competent for. With mid-term perspective, there are no plans for the establishing of
new institutions, rather within the Ministry of economic development constant strengthening of the
capacities will be carried out through adequate trainings of the employees.
The Public Healthcare Institution “Public Health Institute”, as a highly specialized institution, is
directed towards the preservation and improvement of citizens’ health by proposing and conducting
measures for the protection and promotion of health with regards to health safety of objects for
general use, and performs laboratory analyses with the purpose of testing health safety.
The activities in the mid-term period will be directed towards the implementation of the adopted
legislation.
Short-term priorities
The Law on technical requirements for products and products compliance appraisal with the
prescribed requirements will be adopted in the First quarter of 2008, on the basis of which individual
regulations will be adopted for cosmetic products, detergents, glass, textile, footwear and wood.

3.1.2.4. Cosmetic products
On the basis of the Law on technical requirements for products and products compliance appraisal
with the prescribed requirements, the Fourth quarter of 2011 will see the adoption of the regulation on
cosmetic products harmonized with the EU decrees 76/768/EC and 907/2006, related to cosmetic
products.

3.1.2.5. Detergents
The Regulation on detergents, which will be harmonized with the Decree 648/2004/EC related to
detergents, will be adopted in the Fourth quarter of 2011.

3.1.2.6. Glass
By adopting the bylaw – Regulation for products made of crystal glass, which is envisaged for the
Second quarter of 2010, the directive 31969L0493 will be transposed into Montenegrin legislation,
which directive is related to products made of crystal glass.

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3.1.2.7. Textile
On the basis of the Law on technical requirements for products and products compliance appraisal
with the prescribed requirements, the Second quarter of 2010 will see the adoption of bylaws by
means of which Textile Directives (31996L0074; 31997L0037; 32004L0034; 31996L0073;
31973L0044; 32007L0004; 32007L0003; 32006L0002; 32003L0003) will be transposed into
Montenegrin legislation.

3.1.2.8. Footwear
On the basis of the Law on technical requirements for products and products compliance appraisal
with the prescribed requirements, the Second quarter of 2010 will see the adoption of the Regulation
by means of which Footwear Directive 31994L0011 will be transposed into Montenegrin legislation.
Institutional framework
The Ministry of Economic Development is competent for the regulation in the field of glass, textile and
footwear. Within the Ministry, there is a Sector for industry and entrepreneurship, i.e. Department for
industrial development and restructuring of industry, with four employees.

3.1.2.9. Wood
On the basis of the Law on technical requirements for products and compliance assessment of
products with prescribed requirements the Law on classification of non-processed wood, which will be
harmonized with the Directive of the Council 68/8/EEZ, then also the Regulation on measuring,
classification and marking of non-processed wood. The adoption of this regulation is aimed at the
creation of conditions for the efficient implementation and thorough harmonization of the legislation
with the Acquis.
In the next short-term period there are plans for drafting studies and projects that would respond to
the key development issues (designing a new brand of the sector, clusters, implementation of the new
design, market recognition) and create prerequisites for the presentation in the international market.
The activities have been envisaged related to the education for the application of the EU norms, as
well as the activities for the establishing of independent control of the quality of goods and services.


3.1.2.10. Fertilizers
3.1.2.10.1. Status
The Law on fertilizers (Official Gazette of the Republic of Montenegro number 48/2007) is harmonized
with the appropriate EU regulation, i.e. Regulation (EC) No 2003/2003, related to mineral fertilizers
and partly with the Directive 91/676/EEC, which is related to the protection of waters from pollution
caused by nitrates from agricultural sources. With the adoption of this law the basis is created for the
transposition and equalization of the EU legislative solutions for mineral fertilizers in Montenegro.
The following bylaws are effective:
   Regulation on methods of fertilizer testing (Official Gazette of the FRY, number 11/99);
   Regulation on conditions for production line, circulation, import and sampling of pesticides and
   fertilizers (Official Gazette of the FRY, number 12/99);
   Regulation on types of packaging material for pesticides and fertilizers and on destruction of
   pesticides and fertilizers (Official Gazette of the FRY, number 35/99);
   Regulation on circulation, import and sampling of fertilizers (Official Gazette of the FRY, number
   59/2001);
   List of organizations authorized for testing plant protection products (pesticides) and fertilizers
   (Official Gazette of the FRY, number 4/2000);
   List of fertilizers which need to have permits in order to put into circulation (Official Gazette of the
   FRY, number 29/2001)


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Institutional framework
The Ministry of agriculture, forestry and water management of Montenegro is a public administration
body competent for fertilizers.
3.1.2.10.2. Short-term priorities
Legislation
With the purpose of gradual harmonization with the EU legislation, within the framework of the
process of stabilization and association, in the short-term period, 2008-2009, bylaws will be made
which stem from the Law on fertilizers. By adopting these bylaws full harmonization will be ensured.
Main disharmony in the area of fertilizers, following the adoption of the new law, is the existing
regulations on the quality of mineral fertilizers which are linked to the JUS norms (Yugoslav
Standard). The bylaws will contain additional EU rules related to the use of ammonium nitrate in the
production of fertilizers, according to public safety requirements, protection of people and property;
reduction of risk of the abuse of ammonium nitrate based fertilizers through the introduction of
measures for preventing such manner of use especially ensuring the possibility of finding such
fertilizers; consumer protection, through the introduction of quality standard and registration.
The bylaws, which will be adopted during the Fourth quarter of 2009, will be harmonized with the EU
regulations that regulate this field.
Institutions
   Establish a body competent for phyto-sanitary activities the competence of which will also extend
   over the area of mineral fertilizers: Deadline: Third quarter of 2008
   Strengthen laboratory capacities.
3.1.2.10.3. Mid-term priorities
Legislation
All the provisions concerning free movement of fertilizers which meet the requirements of the
Regulation 2003/2003 will be effective until mid-term period.

3.1.3. NEW APPROACH DIRECTIVES

3.1.3.1. Low-voltage electrical equipment
Legislative framework
The coming into effect of the national Law on technical requirements for products and products
compliance appraisal with the prescribed requirements, in the First quarter of 2008, will enable the
creation of a legal base for the adoption of the appropriate bylaws, i.e. regulations related to the field
of low-voltage electrical equipment. In that sense, adoption is envisaged of the regulation on electrical
equipment intended for the use within certain voltage limits, by means of which prerequisites will be
created for the harmonization of national legislation with the EU legislation in the area of low-voltage
electrical equipment (Directive 73/23/EEC).
Institutional framework
The adoption of the Law on on technical requirements for products and products compliance appraisal
with the prescribed requirements, and of the accompanying bylaws lies within the competence of the
Ministry of economic development.

3.1.3.2. Simple pressure vessels
Legislative framework
National regulations which define simple pressure vessels are currently defined by a group of
standards JUS M.E6. On the basis of the Law on technical requirements for products and products

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compliance appraisal with the prescribed requirements, the First quarter of 2009 will se the adoption of
the regulation on simple pressure vessels, in accordance with EU Directive 87/404/EEC. After that, all
necessary measures will be undertaken for the authorization of the compliance appraisal body in order
to be able to initiate the application of the Regulation on simple pressure vessels.
Institutional framework
Regulations in this area are within the competence of the Ministry of economic development.

3.1.3.3 Toy safety
3.1.3.3.1. Status
Legislative framework
In Montenegro, in the field of toy safety the following regulations are applied:
    Law on health safety of food and of object of general use (Official Gazette of the FRY, number
    37/02) and the bylaws adopted on the basis of this law:
    Regulation on conditions related to health safety of objects of general use which can be put into
    circulation (Official Gazette of the SFRY, number 18/91);
    Regulation on conditions in relation to expert personnel, premises and equipment which healthcare
    and other organizations have to meet in order to be able to perform analyses and super-analyses
    of food and objects of general use (Official Gazette of the FRY number 60/02);
    Instruction on manner of taking samples for performing analyses and super-analyses of food and
    objects of general use (Official Gazette of the SFRY number 60/1978);
    Law on health monitoring over food and objects of general use (Official Gazette of the Socialist
    Republic of Montenegro number 4/88) and the bylaws adopted on the basis of this law:
    Regulation on conditions and manner of testing food and objects of general use during their
    production and manner of keeping records of performed tests (Official Gazette of the Socialist
    Republic of Montenegro number 8/75);
This area is not harmonized with the EU regulations. Since there are certain shortcomings for its
adequate application, there is a need for further harmonization with the EU legislation.
Institutional framework
The Ministry of Health, Labour and Social Welfare – Health protection Sector, with the Health-sanitary
Inspection as its integral part, is competent for the area of health safety and inspection monitoring.
The Public Healthcare Institution “Public Health Institute”, as a highly specialized institution, is directed
towards the preservation and improvement of citizens’ health by proposing and implementing
measures for the protection and promotion of health in relation to health safety of objects of general
use – toys, and performs laboratory analyses with the purpose of testing health safety.
3.1.3.3.2. Short-term and mid-term priorities
On the basis of the Law on technical requirements for products and products compliance appraisal
with the prescribed requirements, planned for the First quarter of 2008, the Fourth quarter of 2011 will
see the adoption of the Regulation on health safety and security of toys, which will be harmonized with
the directive 88/378/EC which is related to toys safety. Deadline – Fourth quarter of 2009.
The activities in the mid-term period will be directed towards the implementation of the law and the
bylaws, and further strengthening of inspection service through better organization and adoption of the
new Law on Sanitary Inspection.




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3.1.3.4. Machine safety
Legislative framework


With regards to the fact that this law was taken over from the federal level, there are certain
shortcomings for its adequate application at the level of Montenegro (like the non-defined register of
technical regulations, authorized bodies etc.), as well as the need for its harmonization with the EU
legislation. The coming into effect of the national Law on technical requirements for products and
products compliance appraisal with the prescribed requirements will ensure the creation of the legal
basis for the adoption of appropriate bylaws, i.e. regulation related to machinery safety. On the basis
of this Law, the Second quarter of 2010 will see the adoption of the Regulation (technical regulation),
which will transpose into the national legal framework the directives for technical requirements for
machinery safety (32006L0042;31998L0037). The activities in the mid-term period will be directed
towards the implementation of the adopted legislation.
Institutional framework
The Ministry of Economic Development is competent for regulations in this area, within the framework
of which there is the Sector for industry and entrepreneurship, i.e. Section for industrial development
and industrial restructuring, with four employees.

3.1.3.5. Personal protection equipment
3.1.3.5.1. Status
Legislative framework
The national legal framework related to personal protection devices and equipment at work is covered
by the Occupational Health and Safety Law (Official Gazette of the Republic of Montenegro number
79/04) and the bylaw, Regulation on devices of personal protection at work and personal protection
equipment (Official Gazette of the SFRY, number 35/69).
The Occupational Health and Safety Law established, on contemporary, technical-technological,
organizational, legal, entrepreneurial and socio-economic bases, all the institutes that the system of
protection at work consists of, and within the framework of these, numerous issues and relations that
put the whole system, directly and in a concrete manner into the function of the protection of life and
health of the employed at work and in connection with work. The Occupational Health and Safety Law
represents an act of systemic character which regulates the rights, obligations and responsibilities of
employers and other subjects in securing, conducting and improving protection at work. The
Occupational Health and Safety Law has generally been harmonized with the General Directive of the
Council 89/391/EEC on the introduction of measures to encourage improvements in the safety and
health of workers at work, and it incorporates the provisions contained in the conventions of the
International Labour Organization. Protection at work has been regulated uniformly for all categories of
the employed and other persons engaged in working process on any ground, regardless of property
relation (private, public, cooperative etc.).
The Occupational Health and Safety Law provides for employers to be obliged to make accessible,
amongst other things, the devices and equipment of personal protection at work, solely if they possess
the prescribed documentation in the official language in Montenegro, in which the manufacturer, and
supplier stated all safety-technical data relevant for risk assessment in working with them, and to
ensure all protection measures at work provided for in the documentation pursuant to the regulations
on occupational health.
Exceptionally, when employer is not able to obtain the prescribed documentation, the same can be
acquired from a legal entity registered for such activities.
Apart from the Occupational Health and Safety Law, protection at work is regulated by collective
agreements (general, branch and individual) and bylaws. The Occupational Health and Safety Law

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has got the total of 43 bylaws, and the bylaw related to personal protection devices is the Regulation
on devices of personal protection at work and personal protection equipment (Official Gazette of the
SFRY, number 35/69), adopted in 1969.
This bylaw establishes more closely measures for securing full protection of the employed at work in
the sense of the use of devices and equipment of personal protection at work.
Institutional framework
The institution, which is competent for passing the regulations in the area of occupational health and
safety, thus also in the area of devices and equipment of personal protection at work, as well as for
monitoring the conducting of the same, is the Ministry of Health, Labour and Social Welfare of
Montenegro. In the Ministry of Health, Labour and Social Welfare of Montenegro – Labour Sector,
there is no body which deals with the drafting of regulations from the area of occupational health and
safety, rather this is done by a working group mostly consisting of occupational health and safety
inspectors – graduated engineers of various technical orientations, headed by the Assistant Labour
Minister. The occupational health and safety inspectors appointed in the working group for drafting the
regulations from the area of occupational health and safety passed through (and permanently pass
through) the training within the framework of the international cooperation with the line Ministry of the
Republic of France and the Republic of Slovenia, the training related to the implementation of the
OHSAS ISO 18000 standard conducted by the Centre for Quality of Machine Engineering Faculty in
Podgorica, seminars organized in the country and abroad by the Stability Pact for South-east Europe,
the International Labour Organization, the European Union of Employers, the European Association of
Trade Unions, the ACILS (American Organization for International Solidarity of Workers), PARIM
(Public Administration Reform in Montenegro), the Ministry of Health, Labour and Social Welfare of
Montenegro, the Ministry of Justice of Montenegro, the Union of Employers of Montenegro, the
Association of Trade Unions of Montenegro etc., possess the certificates of the University of
Montenegro – Foreign Language Institute on the knowledge of English (from the basic to the highest
degree), they all use PCs, and one inspector was engaged by the ILO on writing the National
Occupational Health and Safety Profile. The same inspector has been appointed as a Focal Point in
the European Occupational Health and Safety Agency with its seat in Bilbao (Spain), which was
established by the Council of Europe at the meeting of the heads of states and Governments on 18th
July 1994.
3.1.3.5.2. Short-term priorities
The short-term priorities do not envisage the adoption of a bylaw related to the use of devices and
equipment of personal protection at work, but there are continuous activities in the sense of drafting
the act on risk assessment which employers must make by 1st January 2007 pursuant to the Law and
the Regulation on manner and procedure of risk assessment, which will greatly contribute to the
raising of awareness on the necessity of use of devices and equipment of personal protection at work.
Legislation
The amendments of the Occupational Health and Safety Law are planned for the Fourth quarter of
2008. The Strategy will define condition in the area of occupational health and safety, objectives,
priorities and manner of achieving the same, as well as the necessary resources for efficient
implementation of measures and regulations from this area. Of the utmost priority is the elaboration of
the existing regulations which are partly harmonized with the Acquis, as well as the adoption of bylaws
related to devices and equipment of personal protection at work, authorized healthcare institutions,
previous and periodical health checks of the employed, as well as prerequisites for the efficient
implementation of the Regulation on manner and procedure of risk assessment which is harmonized
with the EU Directives.
The ultimate objective is full harmonization of legislation with the Acquis and efficient implementation
of these rules through the functionality of independent competent authorities, in order to enable
efficient application of measures and regulations related to occupational health and safety, which
brings to the overall wellbeing, increased employment, reduction of deaths, collective and serious


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injuries at work, as well as dangerous occurrences which might endanger the safety and health of the
employed.
The working group in the Ministry of Health, Labour and Social Welfare of Montenegro will be working
on harmonization of legislation, with the assistance of foreign experts.
Institutions
In accordance with the recommendations of the European Partnership the improvement of work of the
Inspectorate is planned with the purpose of ensuring health and safety at work through normative
regulations related to the Occupational Health and Safety Agency and passing of appropriate bylaws
in the area of occupational health and safety. In this period, special attention will be paid to
professional training of the occupational health and safety inspectors.
3.1.3.5.3. Mid-term priorities
Legislation
Further harmonization of regulations in the field of occupational health and safety with the Acquis.
The most important bylaw related to the use of devices and equipment of personal protection is the
Regulation on minimum requirements for protection and health of employees when using devices and
equipment of personal protection at work, planned for 2010.
Institutions
Strengthening of the existing institutions of the system.


3.1.3.5.4. Employment plan

                                        Existing -                                Planned number of employees
           Institution                                       2007
                                        planned                        2008         2009        2010        2011         2012
            Ministry                    Existing               1         1           1            1           1           1
  Occupational Health and
                                        Existing               12       12           12          12          12           12
     Safety Inspection
  Occupational Health and
                                        Planned                -         -            -           -           -           -
      Safety Agency
3.1.3.5.5. Financial requirements

                               2008                   2009                2010                  2011                2012
      Budget                  89.740                 103.740             96.740                89.740              61.740
                         4.000 Council of
 Foreign support                                100.000 GTZ          100.000 GTZ            100.000 GTZ
                         Europe
Note:
Budgetary funds include the drafting of bylaws, continuous training of employees, participation of foreign consultants
Foreign support: Council of Europe and IPA

3.1.3.6. and 3.1.3.7. Explosives for civilian use and equipment and protection systems
in potentially explosive environments
3.1.3.6.1. Status
Legislative framework
The legislation which covers this area contains the following regulations:
   Law on circulation of explosive substances (Official Gazette of the SFRY number 53/91 and OG
   FRY no. 68/2002);
   Law on explosive substances, flammable liquids and gasses (OG SR Montenegro 11/88);

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                                     Government of Montenegro


The Law establishes the harmonization of legislation related to the production and circulation of
explosive substances with the European Agreement concerning the International Carriage of
Dangerous Goods by Road-ADR, dated 30th September 1957, the Convention concerning
International Carriage by Rail-COTIF, dated 9th April 1980, the European Agreement Concerning the
International Carriage of Dangerous Goods by inland Waterways-ADN), the Convention on
International Civil Aviation of 7th December 1944 and the Vienna Convention on Civic Responsibility
for Nuclear Damage, dated 21st April 1963.
Institutional framework
The Ministry of Interior – Sector for Emergency Situations and Civilian Security is entrusted with the
implementation of this Law. This Ministry in cooperation with others – Ministry competent for
transportation and maritime affairs, Ministry for defence affairs, Ministry competent for foreign affairs,
Ministry of health - issues approvals and passes bylaws.
The employees of the Sector for emergency situations and civilian security and life-saving services,
passed through various trainings with the support of the Stability Pact (risk management, management
in emergency situations, fire protection, management in aircraft accidents); French service for
emergency situations (training for seismic risks); CMEP (civilian-military planning of the NATO) as well
as of the George Marshall Centre (accident management for the highest management level).
3.1.3.6.2. Short-term priorities
The Law on transport of dangerous substances, adopted in 2007, is the first in a series of laws
regulating the area of transport of dangerous substances, i.e. explosive substances, flammable liquids
and gasses, as well as circulation of explosive substances, which enables the basis for Montenegro
to ensure the establishing of legislation in the area of transport of dangerous substances.
The bylaws for the implementation of this law will be adopted by the end of the First quarter of 2009.

   Regulation on manner of road transport of dangerous substances.
   Regulation on manner of railway transport of dangerous substances;
   Regulation on manner of transport of dangerous substances via inland waterways;
   Regulation on manner of maritime transport of dangerous substances;
   Regulation on manner of air transport of dangerous substances;
   Regulation on manner of keeping record on dangerous substances;
These regulations will prescribe the manner of transport of dangerous substances via road and other
forms of transport, the measures being undertaken in preparing the transport of dangerous
substances (at loading, discharging and along-the-way handling) and the manner of monitoring the
implementation of these measures.
The Law establishes the harmonization of legislation related to the production and circulation of
explosive substances with the European Agreement concerning the International Carriage of
Dangerous Goods by Road-ADR, the Convention concerning International Carriage by Rail-COTIF,
the European Agreement Concerning the International Carriage of Dangerous Goods by inland
Waterways-ADN, the Convention on International Civil Aviation and the Vienna Convention on Civic
Responsibility for Nuclear Damage.
The text of the Law is partly harmonized with the Council Directive 67/548/EEC on harmonization of
laws, regulations and administrative acts related to the classification, packing and marking of
dangerous substances, with the Commission Directive 93/67/EEC which envisages the principles for
the risk assessment for people and environment from substances notified in accordance with the
Council Directive 67/548/EEC and the Commission Decision 2003/635/UEZ, which is in accordance
with the Directive 94/55/EZ, and the member states authorize certain discrepancies with regards to the
road transport of dangerous substances (text is relevant for the EEA – European Economic Area).




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The Law on explosive substances and the law on flammable liquids and gasses will be adopted in the
Second quarter of 2008. The Laws are related to the Article 61 of the Agreement on Stabilization and
Association and Article 18 of the Protocol on land transport.
The text of the Law on explosive substances will also be partly harmonized with the Council Directive
93/15/CEE on the market placement and monitoring of explosives for civilian purposes, the Council
Directive 67/548/EEC on technical progress with regards to the harmonization of laws, regulations and
administrative acts related to the classification, packing and marking of dangerous substances, with
the Commission Directive 93/67/EEC which envisages the principles for the assessment of risk for
people and environment from substances notified in accordance with the Council Directive
67/548/EEC.
The Law on explosive substances will ensure legal prerequisites for Montenegro to establish
legislation in the area of explosive substances, and it is one of the laws which regulate the filed of
explosive substances, i.e. explosive substances, flammable liquids and gasses.
Employment plan

           Institution               Existing-         2007                     Planned number of employees
                                     planned
                                                                      2008         2009        2010        2011          2012
   MIAPA – Sector for
 emergency situations and
                                     Existing            92             92         125           140        140          140
     civilian security
Note:
    Systematized jobs - 125 employees;
    Filled vacancies - 92 employees;
    In 2009, the scope of activities of the Section 112 will expand, which will condition the need for the increased number of
    employees, i.e. 15 more.

Financial requirements

                           2008              2009                  2010                   2011                    2012
        Budget           2.164.000        2.506.500             2.757.200              3.032.906              3.336.197
Foreign support          600.000           450.000               300.000                 150.000               150.000
Note:
Planned budgetary funds are related to the gross salaries of the employed, expenditures for material and services and for
renting the premises being used by the Sector.
Planned Foreign support is related to:
    Funds for training life-saving services: € 150.000, per € 50.000 in 2009, 2010 and 2011.
    Funds for training of voluntary life-saving services: € 400.000, per € 100.000 in 2009, 2010, 2011 and 2012.
    Funds for the acquisition of equipment for chemical, biological and radiological-nuclear accidents: € 300.000, per €
    150.000 in 2008 and 2009.
    Funds for seismic accident: € 300.000, per € 150.000 in 2009 and 2010.
    Funds for digital system of radio-signals: € 450.000 in 2008.

3.1.3.8. Elevators

Legislative framework
The national regulations which define the legislative framework for elevators are:
   Law on Standardization,
   Law on technical requirements for products and products compliance appraisal with the prescribed
   requirements,
   Occupational Health and Safety Law.
Currently, the effective regulations in this field are technical regulations which have not yet been
harmonized with the European requirements. These are:

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                                     Government of Montenegro


   Regulation on technical regulations for electrically driven elevators for vertical transport of persons
   and cargo (OG SFRY no. 28/89; OG SFRY no. 22/92),
   Regulation on mandatory attestation of electrically driven elevators for vertical transport of persons
   and cargo and on conditions which must be met by organizations of associated labour authorized
   for attesting such products (OG SFRY no. 27/90),
   Regulation on procedure and deadlines for conducting regular testing of working devices, devices
   and equipment for personal protection at work and conditions of working environment (OG SFRY
   no. 71/05),
   Regulation on technical norms for protection of facilities from atmospheric discharge (OG SFRY
   no. 11/96),
   Regulation on technical norms for low voltage electrical installations (OG SFRY no. 287/95).
On the basis of the Law on technical requirements for products and products compliance appraisal
with the prescribed requirements, regulations will be adopted which will transpose the directives
31995L0016 on approximation of laws of EU member states related to elevators, and 32006L0042 on
harmonization of legislations of member states in relation to machinery, as well as the
amendments of this Directive – 95/16/EC.
Institutional framework
The Ministry of Economic Development of Montenegro is competent for the passing of regulations for
elevators, as well as for the monitoring of the implementation of the same.
The Standardization Institute of Montenegro gives the basis for the drafting of technical regulations,
establishes the infrastructure of advisory and technical bodies (technical committees) for performing
the activities of Montenegrin standardization and secures the compliance of Montenegrin standards
and similar documents with the European and international standards and similar documents.
The accreditation body should issue authorities to firms for the activities of mandatory attestation.
Following the adoption of the new Law on Standardization and the Law on technical requirements for
products and products compliance appraisal with the prescribed requirements, detailed analysis will
be made with the purpose of the identification of obligations which stem from the new approach, which
should be transposed into the national legislation, in accordance with the subject EU Directives.
Also, the establishing and preparation of institutions is imminent, as well as the education of personnel
for performing the procedure of appraising the compliance of elevators, equipment and devices, as
well as the preparation of accredited laboratories for conducting testing in accordance with EN
Regulation (European standards for electrical elevators EN 81-1 and European standards for hydraulic
elevators EN 81-2), just like the adoption of harmonized European standards.
With the purpose of increasing the ability for the implementation of future documents and regulations,
the Ministry of Economic Development will work continuously on the strengthening of administrative
capacities.

3.1.3.9. Non-automatic measuring instruments
3.1.3.9.1. Status
Legislative framework
The Council Directive 90/384/EEC dated 20th June 1990 on harmonization of laws of member states
related to non-automatic scales has been partly transposed into the Montenegrin legislation through
the Law on metrology (OG Serbia and Montenegro, no. 44/05), as well as through the following
bylaws:
    Regulation on manner and conditions of certification of measuring devices (OG Republic of
    Montenegro no. 2/07),
    Regulation on manner in which measuring devices are tested (OG Republic of Montenegro
    no.2/07),
    Instruction on conducting metrological monitoring (OG Republic of Montenegro no. 2/07),

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   Order on types of measuring devices which must be certified, i.e. certification of type of measuring
   device (OG Republic of Montenegro no. 3/07),
   Regulation on metrological conditions for mass measuring devices – scales with non-automatic
   functioning of accuracy class (I), (II), (III), (IIII). MARK. MUS. M-(I, II, III, IIII)/1 (OG SFRY no. 4/87).
Institutional framework
The Metrology Institute conducts the procedure of compliance appraisal with metrological
requirements, carries out certification of mass measuring devices with non-automatic functioning, as
well as metrological monitoring over the use of these measuring devices.
3.1.3.9.2. Short-term priorities
Legislation
With the purpose of transposing the Council Directive 90/384/EEC into the Montenegrin legislation the
following bylaws will be adopted during 2008 and 2009:
     Regulation on manner and conditions of certification of measuring devices (Fourth quarter of
     2008),
     Regulation on manner in which testing is done of measuring device type (Fourth quarter 2008),
     Instruction on conducting metrological monitoring (Fourth quarter 2008),
     Order on types of measuring devices which must be certified, i.e. certification of measuring device
     type (Fourth quarter of 2008),
     Regulation on technical requirements and procedures of compliance appraisal for scales with non-
     automatic functioning (Fourth quarter 2009).
Institutions
The Ministry of Economic Development is competent for the adoption of the planned bylaws, as well
as the Metrology Institute.
The regulations related to compliance appraisal with metrological requirements, non-automatic
functioning measuring devices, certification of such measuring devices, as well as the monitoring over
the use of such measuring devices will be carried out by the Metrology Institute.
3.1.3.9.3. Mid-term priorities
Legislation
Since it has been planned for the Council Directive 90/384/EEC to be transposed into the Montenegrin
legislation in the Fourth quarter of 2009, the implementation of the Directive will commence in 2010.
Institutions
The Metrology Institute will be equipped for carrying out the procedure of compliance appraisal for the
needs of implementation of the directive on scales with non-automatic functioning by 2010.

3.1.3.10. Measuring instruments
3.1.3.10.1. Status
Legislative framework|
The European Parliament and Council Directive 2004/22/EEC (MID directive) on measuring devices
has been partly transposed into the Montenegrin legislation through the Law on metrology (OG Serbia
and Montenegro, no. 44/05), as well as the following bylaws:
- Regulation on manner and conditions of certification of measuring devices (OG Republic of
   Montenegro no. 2/07),
- Regulation on manner in which testing is done of measuring device type (OG Republic of
   Montenegro no. 2/07),
- Instruction on conducting metrological monitoring (OG Republic of Montenegro no. 2/07),



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-   Order on types of measuring devices which must be certified, i.e. certification of measuring device
    type (OG Republic of Montenegro no. 3/07),
-   Order on types and forms of stamps and other signs used when certifying measuring devices (OG
    Republic of Montenegro no. 3/07).
Montenegro applies the following regulations related to measuring devices covered by the MID
directive, which were adopted prior to the coming into effect of the stated directive:
- Regulation on metrological conditions for taximeters (OG SFRY no. 9/85),
- Regulation on metrological conditions for general purpose length measuring devices (OG SFRY
    18/88),
- Regulation on metrological conditions for water gauges (OG SFRY 51/86),
- Regulation on metrological conditions which must be met by heat energy measuring devices (OG
    SFRY 56/88),
- Regulation on metrological conditions for barrels, vats, buckets and demijohns (OG SFRY 58/85),
- Regulation on metrological conditions for laboratory measuring devices – glass measuring vessel,
    with one measuring line (OG SFRY 28/85);
- Regulation on metrological conditions for flow measuring devices for gas volume (OG SFRY
    9/85 ),
- Regulation on metrological conditions for measuring devices which correct volume of flowed gas
    (OG SFRY 9/85 ),
- Regulation on metrological conditions for casings of road and rail scales (OG SFRY 31/87),
- Regulation on metrological conditions for induction electric meters (OG SFRY 54/89),
- Regulation on metrological conditions for static active electricity meters, of precision class 1and 2
    (OG FRY 9/92),
- Regulation on metrological conditions for mass measuring devices – scales for measuring moving
    vehicles (OG SFRY 33/84),
- Regulation on metrological conditions for electro-mechanical measuring converters for mass
    measuring devices (OG SFRY 5/85),
- Regulation on metrological conditions for mass measuring devices – automatic scales with adding
    of discontinuous measurement results (OG SFRY 59/87),
- Regulation on metrological conditions for mass measuring devices – automatic scales on transport
    belt, of precision class 1 and 2 (OG SFRY 64/89),
- Regulation on metrological conditions for automatic scales (OG SFRY 1/84),
- Regulation on metrological conditions for machines for measuring lengths of wire and cable (OG
    SFRY 51/86),
- Regulation on metrological conditions for flow measuring devices for volumes of various liquids
    located within a measuring device (OG SFRY 9/85);
- Metrological instruction for inspection of static electricity meters (Herald 1/2000),
- Metrological instruction for inspection of induction electricity meters (Herald 1/83).
Institutional framework
The Metrology Institute carries out the procedure of compliance appraisal with metrological
requirements of water gauges, gas-meters and volume correctors, active electricity meters, heat
energy meters, measuring installations for uninterrupted dynamic measurements of various liquids
except water, automatic scales, taximeters, materialized measures, dimension measuring devices and
exhaust gas analyzers. The Institute carries out the procedure of certification of stated measuring
devices, as well as the metrological monitoring over the use of such measuring devices.
3.1.3.10.2. Short-term priorities
Legislative framework
With the purpose of transposing the Directive 2004/22/EC into the Montenegrin legislation, the
following bylaws will be passed during 2008 and 2009:
- Regulation on manner and conditions of certification of measuring devices (Fourth quarter 2008),
- Regulation on manner in which testing is done of measuring device type (Fourth quarter 2008),
- Instruction on conducting metrological monitoring (Fourth quarter 2008),

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-   Order on types of measuring devices which must be certified, i.e. certification of measuring device
    type (Fourth quarter 2008),
-   Order on types and forms of stamps and other signs used when certifying measuring devices
    (Fourth quarter 2008).
Institutional framework
For the adoption of the planned bylaws the competence lies with the Ministry of Economic
Development, as wel as with the Metrology Institute.
The Metrology Institute will implement the regulations related to compliance appraisal with
metrological requirements of water gauges, gas-meters and volume correctors, active electricity
meters, heat energy meters, measuring installations for uninterrupted dynamic measurements of
various liquids except water, automatic scales, taximeters, materialized measures, dimension
measuring devices and exhaust gas analyzers. The Institute carries out the procedure of certification
of stated measuring devices, as well as the metrological monitoring over the use of such measuring
devices.
3.1.3.10.3. Mid-term priorities
Legislative framework
With the purpose of transposing the Directive 2004/22/EC into the Montenegrin legislation the Fourth
quarter of 2010 will se the adoption of the regulation on technical and metrological conditions related
to measuring devices. The stated directive will be implemented by the end of 2012.
Institutional framework
Since it has been planned for the Directive 2004/22/EC to be transposed into the Montenegrin
legislation by the end of 2012, the Metrology Institute will be equipped for carrying out the compliance
appraisal procedure for the needs of the implementation of the Measuring devices directive by the end
of 2012.

3.1.3.11. Pressure equipment
3.1.3.11.1. Status
Legislative framework
The national regulations which define pressure equipment, adopted in accordance with the legislation
of the former SFRY, FRY and the state union Serbia and Montenegro, which were accepted under the
Item 4 of the Resolution on the Declaration of Independence of the Republic of Montenegro (OG no.
36/06), and which are applied until the adoption of appropriate Montenegrin regulations are the
following:
− Law on Standardization (OG Serbia and Montenegro, no. 44/05), which regulates the principles
     and objectives of standardization, establishing, organization and activity of standardization
     organization, adoption, issuance and application of standards and similar documents in the area of
     standardization, as well as inspection monitoring over the implementation of this law. The EU
     experts took part in the drafting of this law, which ensured the inclusion of the European solutions
     into the Law.
− Law on technical requirements for products and products compliance appraisal with the prescribed
     requirements (OG Serbia and Montenegro, no. 44/05), which, amongst other things, defines the
     manner of prescribing technical requirements for products with prescribed requirements, the
     adoption of technical regulations and requirements that must be fulfilled by products being put in
     the circulation or use, as well as conducting monitoring over the fulfilling of requirements from
     technical regulations.
-    Decree on manner of execution, drafting and adoption of technical regulations and keeping the
    register of these regulations (OG FRY, no. 4/97), which regulates the manner of drafting and
    adopting technical regulations, manner of keeping records of technical regulations in the procedure
    of preparing and manner of keeping register of adopted and published technical regulations.

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-   Decree on manner of drafting, determining and adopting Yugoslav standards (OG FRY no. 4/97),
    which prescribes the manner of drafting, determining and adopting Yugoslav standards.
−   Decree on manner of determining harmonization and on manner of conducting technical
    monitoring (OG FRY no. 55/97 and 3/03), which defines the manner of determining harmonization
    of processes, products and services, quality system, environment protection system with technical
    and other regulations, i.e. standards or technical specification:
−   Manner of confirming that persons who evaluate quality system and environment protection
    system fulfil the conditions from technical and other regulations, i.e. standards;
−   Manner of issuing compliance certificates;
−   Manner of determining compliance certificates;
−   Product testing manner;
−   Manner of conducting compliance inspection;
−   Conditions which must be fulfilled by manufacturers, service provider or importer for giving
    compliance statement;
−   Form and use of compliance mark;
−   Manner of conducting technical monitoring and measures taken in conducting technical monitoring
    and
−   Manner of keeping record of issued certificates.
−   Law on energy (OG Republic of Montenegro no. 39/03), which, amongst other things, defines
    monitoring over the application of the Law and other technical regulations and quality norms at
    designing, construction, functional testing, trial period, exploitation and maintenance of products
    and services related to:
−   Steam, fire-tube and water-tube boiler plants (including oil burning boilers), steam super-heaters
    and water haters, plants and pressure vessels.
−   All unmovable and portable pressure vessels for compressed, liquid and under pressure dissolved
    gasses.
−   Facilities for production and storing of gas and oil products.
−   Plants and installations for production, transport and distribution of heat energy.
−   Plants and installations for production, transport and distribution of technical gasses.
−   Assurance that the employed with energy subject are qualified for designing, construction,
    monitoring, maintenance and handling of facilities, plants, installations and pressure equipment.
−   Regulation on manner and programme of taking professional exam and qualification exam for
    workers engaged on the activities of technical management, technical monitoring and handling
    certain energy plants. Professional exam, and qualification exam according to the provisions of this
    regulation are taken by the employed who work on the activities and tasks of managing certain
    energy plants which requires professional exam/qualification exam to be successfully passed.
−   Law on pipeline transport of gaseous and liquid carbohydrates (OG FRY no. 29/97), which
    regulates conditions for safe and undisturbed transport of gaseous and liquid carbohydrates.
−   Regulation on technical conditions and norms for safe transport of gaseous and liquid
    carbohydrates via main oil and gas pipelines and those for international transport (OG SFRY no.
    26/85), which prescribes technical conditions and norms for safe transport of liquid and gaseous
    carbohydrates via main oil and gas pipelines and those for international transport, minimum
    technical and other data which must be kept and period of storing such data and investment-
    technical documentation on these oil and gas pipelines, as well as technical conditions and norms
    for measures of protecting people and property and for protecting oil and gas pipelines and plants
    and devices which are their integral part.
−   Regulation on construction of plants for liquid petrol gas and on storing and transferring of liquid
    petrol gas (OG SFRY no. 26/71), which regulates the construction of plants for liquid petrol gas
    and for storing and transferring liquid petrol gas.
−   Regulation on technical norms for devices and equipment for driving motor vehicles which use
    liquid petrol gas (OG SFRY no. 7/84), regulating conditions which must be met by devices and
    equipment of motor vehicles driven by liquid petrol gas.


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−   Regulation on technical norms for pumps and compressors (OG SFRY no. 32/74), which
    determines technical norms and conditions for designing, construction, mounting of pumps and
    compressors.
−   Regulation on constructing stations for supplying fuel to motor vehicles and on storing and
    transferring fuel (OG SFRY no. 27/71).
−   Regulation on technical norms for designing, constructing, operating and maintaining gas boiler
    rooms (OG SFRY no. 10/90 and 52/90).
−   Regulation on technical norms for stable pressure vessels (OG SFRY no. 16/83).
−   Regulation on technical norms for stable pressure vessels for liquid atmospheric gasses (OG
    SFRY no. 9/86).
−   Regulation on technical norms for mounting stable pressure vessels for liquid atmospheric gasses
    (OG SFRY no. 39/88).
−   Regulation on technical norms for mounting stable pressure vessels for liquid carbon-dioxide (OG
    SFRY no. 39/90).
−   Regulation on technical norms for survey and testing of stable pressure vessels for liquid carbon-
    dioxide (OG SFRY no. 76/90)
−   Regulation on technical norms for movable closed vessels for compressed, liquid and under
    pressure dissolved gasses (OG SFRY no. 1/03).
    JUS ISO 11755 – Bottles for liquefied gasses
    JUS ISO         11372          "        "     "
    JUS ISO         1113           "        "     "
    Main group JUS M. E – Thermo-energy devices and pressure vessels
    Main group JUS M. Z - Pressure vessels
    Main group JUS C. T – Technological processes of metal processing
    Law on inspection monitoring (OG Republic of Montenegro no. 39/03), which regulates the
    principles of inspection monitoring, the manner and procedure of conducting inspection monitoring,
    obligations and authorities of inspectors and other issues relevant for conducting inspection
    monitoring.


The national standards and similar documents are adopted in accordance with the Law on
Standardization (OG Serbia and Montenegro no. 44/05) and the rules of the Standardization Institute,
which are harmonized with rules of the European and international organizations, as well as with the
Code of good practice for drafting, adopting and applying standards from the Agreement on technical
regulations in trade of the World Trade Organization, with the purpose of harmonization of legislation,
implementation of laws and rules on competition, according to the Chapter VI of the Agreement on
stabilization and association, i.e. the Article 77 (Standardization, metrology, harmonization,
accreditation, compliance appraisal).
Institutional framework
The Ministry of Economic Development is competent for the adoption of norms in the field of pressure
equipment, as well as for the monitoring of implementation.
3.1.3.11.2. Short-term priorities
Short-term priorities and deadlines are in line with EP recommendations. This includes drafting of the
Regulation on technical requirements for pressure equipment, which should be adopted in second
quarter of 2008.


3.1.3.11.3. Mid-term priorities
Further monitoring and harmonization of legislation with the EU legislation in the area of pressure
equipment are priorities within the period from 2010 to 2012..


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                                  Government of Montenegro



3.1.3.12. Hot water boilers
Legislation
The national legislation which defines boilers (firetube boilers) is contained within the Group of
standards JUS M. E6 - Central heating, Devices for central heating and Heat generators.




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Short-term priorities
Short-term priorities, in accordance with the EP recommendations, cover the drafting of the Regulation
on efficiency requirements of new firetube boilers using liquid and gaseous fuel, in accordance with
the EU Directive EU 92/42/EEC and 90/396/EEC. The Regulation will be adopted in the first quarter of
2009.
Also, all necessary measures will be undertaken aimed at equipping compliance appraisal body in
order to be able to commence with the implementation following the drafting of the regulation.

3.1.3.13. Gas appliances
Legislation
The national regulations which define gas appliances are contained in the Group of standards - JUS
M. E6 - Gas appliances
Short-term priorities
Short-term priorities, in line with the EP recommendations, comprise the drafting of the Regulation for
gas appliances in accordance with the EU Directive 90/396/EEC and 93/68 EEC, in the Fourth quarter
of 2008, as well as encouraging, equipping and establishing national products compliance appraisal
body – Fourth quarter of 2008.

3.1.3.14. Refrigeration devices
Legislative framework
Within the framework of the activities on the implementation of the Action Plan for the realization of
Energy Efficiency Strategy, the year 2007 saw the beginning of discussion on the need for transposing
the Directive 96/57/EEZ on requirements for energy efficiency of electrical refrigerators, freezers and
their combinations in households. The need was recognized for the adoption of a special Law on
energy efficiency, the adoption of which is planned for the Fourth quarter of 2008.
With the coming into effect of the national Law on technical requirements for products and products
compliance appraisal with the prescribed requirements, it will be possible to create legal basis for the
adoption of appropriate bylaws, i.e. regulation related to this area, i.e. Regulation on requirements for
energy efficiency of electrical refrigerators, freezers and their combinations in households, by means
of which prerequisites will be created for the harmonization of national legislation with the EU
legislation in this field.
Institutional framework
Following the adoption of a special Law on energy efficency with already adopted Law on technical
requirements for products and compliance assessment of products with prescribed requirements, all
the necessary assumptions will be secured for the adoption of the accompanying bylaws which
regulate this area during the year 2009. The drafting of these acts lies within the competence of the
Ministry of Economic Development.

3.1.3.15. Radio and telecommunications terminal equipment
Legislative framework
Currently, this area is not regulated by special regulations in Montenegro. The adoption of the Law on
electronic communications has been planned for the Second quarter of 2008, which will define
conditions under which radio and telecommunications equipment can be placed on the market, put into
service and used in Montenegro. The new Law envisages for the Ministry of transportation, maritime
affairs and telecommunications, in cooperation with the ministry competent for standardization
activities, to prescribe technical conditions for the issuance of compliance certificate for radio and
telecommunications terminal equipment, which serves as a proof that technical characteristics of the
equipment have been harmonized with the law and the standards. The Law does not allow the use of

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or connection to public communications network, radio or telecommunications terminal equipment,
which is not compliant with the valid regulations.
The adoption is planned of the Regulation on radio and telecommunications terminal equipment
(deadline: year 2008), based on the authorization from the Article 12, item 29, of the Law on
telecommunications (OG Republic of Montenegro no. 59/00) and the provisions of the EU Directive
1999/05, in order to precisely define conditions which must be met by radio and telecommunications
terminal equipment (RTT), which is produced, imported, put onto market and used in Montenegro. The
regulation also plans to prescribe the manner and procedures of compliance appraisal of RTT
equipment with elementary requirements, then marks and manner of marking RTT equipment,
recognizing approvals given by competent international institutions and publishing the list of
harmonized standards, as well as other international standards, necessary for compliance appraisal of
RTT equipment.
Also, the implementation will continue of the Strategy of electronic communications sector, adopted in
2006, in relation to the priority objectives defined by it, concerning the technical issues and guidelines
for the area of radio and terminal telecommunications equipment, with the purpose of securing the
application of the European standards in this area.
Institutional framework
The Ministry of Transportation, Maritime Affairs and Telecommunications proposes to the Government
development plans in the area of telecommunications and takes care of their implementation, in
cooperation with the regulatory body prepares legislative framework in this field, coordinates and
encourages research and development of telecommunications, establishes universal services which
should be provided by operators of public fixed telecommunications network and carries out other
activities in accordance with the Law on telecommunications.
The Agency for telecommunications and postal services (AGENTEL), as a regulatory body,
established by the Decision of the Government of Montenegro in 2001, is the regulator of the
telecommunications industry of Montenegro. The Agency was established as an independent
regulatory body, functionally independent from all subjects that exploit telecommunications networks,
provide equipment or offer services. The competence of the Agency and its primary role is in the
development of the necessary regulation infrastructure, design and implementation of the regulation
framework, as well as undertaking appropriate steps, which would lead the transition process towards
the new international telecommunications environment, actively considering the degree of
liberalization of telecommunications market in Montenegro and stimulating private investments in the
manner which respects        national interests and objectives of the economic development of
Montenegro.
Employment plan

                                   Existing -                        Planned number of employees
          Institution                               2007
                                   planned                 2008        2009      2010     2011       2012
MTMAT – Telecommunications
                                   Existing          2       6          6          6       6          6
          sector
        Agency for
                                   Existing         42      42          42        42       42         42
   telecommunications
Financial requirements

                          2008             2009             2010               2011              2012
      Budget             256.387          274.334          293.537            314.085           336.071
  Foreign support           -                -                -                  -                 -




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3.1.3.16. Electromagnetic compatibility
3.1.3.16.1. Status
Legislative framework
 The Broadcasting law (OG Republic of Montenegro no. 56/04) defines basic conditions for the
construction and maintenance of broadcasting, satellite, MMDS and cable distribution systems, and
envisages the competence of the Broadcasting Agency in the part related to establishing measures for
respecting electromagnetic compatibility on the occasion of the construction and use of these
systems.
The effective Law on telecommunications (OG Republic of Montenegro no. 59/00) does not establish
legal basis for the adoption of bylaws which would define the area of electromagnetic compatibility.
The Regulation on electromagnetic compatibility (OG Republic of Montenegro no. 21/05) was adopted
by the Broadcasting Agency on the basis of the Broadcasting Law (OG Republic of Montenegro no.
56/04) by means of which basic requirements have been satisfied of the Directive 89/336/EEC related
to electromagnetic compatibility. The regulation prescribes conditions, refers to norms and
requirements which electrical and other technical equipment which is produced, imported, put into
circulation in Montenegro, must fulfil, in order for such equipment to be able to function without
disturbances, and in order not to produce electromagnetic disturbances above the permitted level,
which enables telecommunication and other radio equipment and appliances to work in accordance
with their purpose. Also, this Regulation prescribes the conditions for compliance appraisal of
electrical products with the requirements of electromagnetic compatibility, whilst the main restriction of
the Regulation is linked to the lack of infrastructure for securing products quality control, having in
mind the fact that in Montenegro there are no independent quality control laboratories.
On the basis of the Resolution on the Declaration of Independence of the Republic of Montenegro
(OG Republic of Montenegro no. 36/06), the Government of Montenegro passed the Decree on
establishing bodies which take over the competencies of the bodies from the Law on technical
requirements for products and products compliance appraisal with the prescribed requirements (OG
Republic of Montenegro no. 56/06).
Institutional framework
Since electromagnetic compatibility has not been entirely regulated in accordance with the Directive
2004/108/EC, the new Law on electronic communications should determine the competence of theline
ministry for the area of telecommunications for the adoption of appropriate bylaws, by means of which
the institutions for its implementation will be precisely defined.
The Broadcasting Agency, as an independent body regulatory body for the area of broadcasting,
implements the Regulation on Electromagnetic compatibility (OG Republic of Montenegro no. 21/05),
within the framework of activities of the Agency Technical Sector, where the need has been
recognized for the training of personnel in this area. On the basis of the Broadcasting Law, the
Broadcasting Agency in its special acts more closely determines the measures for respecting
electromagnetic compatibility (EMC) at construction, utilization and maintenance of broadcasting,
satellite and cable distribution systems. Also, the Broadcasting Agency, performs monitoring over the
application of the Regulation on electromagnetic compatibility, where it is limited to the equipment and
devices used in broadcasting sector.
The Telecommunications and Postal Activity Agency is at the stage of establishing testing-measuring
laboratories for the needs of which equipment has been acquired which can be partly used for
electromagnetic compatibility appraisal. Also, the lack of personnel capacities within inspection
services is obvious, as well as the need for the acquisition of the missing equipment.
3.1.3.16.2. Short-term priorities
   Adoption of the Law on electronic communications in the Second quarter of 2008.


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                                      Government of Montenegro


   Adoption of the Regulation on electromagnetic compatibility which will be fully harmonized with the
   Directive 2004/108/EC. It was planned for the Regulation to become effective in the First quarter of
   2009, and to eliminate barriers for the free circulation of goods in this area through the
   implementation of the same.
   Adoption of the Law on technical requirements for products and products compliance appraisal
   with the prescribed requirements will regulate the manner of prescribing technical requirements for
   products, compliance appraisal, adoption of technical regulations, register of technical regulations,
   carrying out monitoring over the fulfilment of requirements from technical regulations, effectiveness
   of documents on the compliance and signs of compliance issued abroad in the area of
   electromagnetic compatibility.
3.1.3.16.3. Mid-term priorities
The establishing and equipping of compliance appraisal body for the area of electromagnetic
compatibility was planned for the First quarter of 2010.
3.1.3.16.4. Employment plan

                                    Existing -                       Planned number of employees
           Institution                            2007
                                    planned                 2008       2009         2010   2011         2012
MTMAT – Telecommunications
                                    Existing        2           6       6              6    6              6
          sector
 Telecommunications Agency          Existing       42           42      42           42     42           42
3.1.3.16.5. Financial requirements

                          2008        2009                2010                2011                2012
      Budget             256.387     274.334             293.537             314.085             336.071
  Foreign support           -            -                  -                   -                   -

3.1.3.17. Recreation vessels
3.1.3.17.1. Status
Legislative framework
The Law on yachts was adopted in July 2007 (OG Republic of Montenegro no. 46/07), by means of
which the provisions of the Law on maritime and inland navigation related to yachts cease to be valid.
The Law on yachts creates user directed legal framework for the development of nautical tourism in
Montenegro. This law regulates state affiliation, identification and inscription of yachts into Yachts
register, manner of sailing into ports, stay and departure of yachts, as well as the rights and
obligations at hiring yachts. The Law is in accordance with the Directive 94/25/EC and the Resolution
no. 40 (TRANS/SC. 3/147). The first and most significant novelty of the Law on yachts is qualitatively
different regulation of yachts registration. The objective is to ensure for foreign and domestic yacht
owners sufficiently attractive Register, retaining at that full application of standards for safety and
security at sea.
The Decree on boats (OG Republic of Montenegro no. 51/04) regulates: conditions and manner of
establishing abilities of boats for sailing, inscription of boats and determining their marks and names,
area of sailing, crews, and examination programme and manner of taking exams for steering boats.
Institutional framework
The Ministry of transportation, maritime affairs and telecommunications carries out administrative
activities related to: maritime transportation; safety of inland and international navigation; security and
safety of maritime transportation; determines indicators and monitors the pollution at sources and
takes urgent measures in case of pollution; ports, marinas and shipyards; administrative monitoring.


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Harbour master offices, Kotor with port branches in Tivat, Zelenika and Herceg Novi and Bar with port
branches in Ulcinj, Budva and Virpazar, as regional organizational units of the Maritime
Transportation Sector of the Ministry of transportation, maritime affairs and telecommunications, carry
out inspection monitoring over: application of regulations which regulate relations at sea and inland
waterways; traffic of foreign and national ships, yachts and boats; protection of sea from pollution;
keeping records of circulation of ships, cargoes and passengers, ship equipment and instruments of
crew members.
Maritime Security Directorate carries out the activities of administration related to: yachts register;
expert and technical affairs in the field of determining abilities for navigation of ships and other
vessels; carrying out of technical survey and the issuing of appropriate certificates; organization and
maintenance of maritime navigation routes; maintenance of maritime lights; maintenance of radio
frequencies in accordance with the national and international regulations; coordination during the
actions of search and rescue at sea and protection of sea from pollution from sailing objects.


3.1.3.17.2. Short-term priorities
Legislation
On the basis of the Law on yachts (OG Republic of Montenegro no. 46/07) the Regulation will be
adopted on manner of keeping the Register of yachts, as well as the Regulation on forms.
The application of the Directive 94/25/EC will be carried out through the amendments of the Decree on
boats.
Institutional framework
The Ministry of transportation, maritime affairs and telecommunications, the Maritime Transportation
Sector, and the departments of Bar and Kotor harbour offices need to be strengthened with the
engagement of at least two employees and two navigation security inspectors.
In the initial stage of the application of the Law on yachts, the department for the register of yachts of
the Maritime Security Directorate will need to be strengthened with three more employees.
3.1.3.17.3. Mid-term priorities
With the realization of mid-term activities legal framework will be established and institutional and
administrative capacities will be strengthened, which will considerably influence the increase of
security and safety of navigation and protection of the sea from pollution from vessels.
Special attention will be directed towards the harmonization of Technical rules for statutory certification
of vessels of the Maritime Security Directorate with the EU regulations.

3.1.3.18. Maritime equipment
3.1.3.18.1. Status
Legislative framework
The Law on maritime and inland navigation (OG FRY, no. 73/00), in the Chapter 6, establishes the
ability of ships for navigation, as well as the equipment which serves to maintain ship’s navigation
safety.
The Decree on boats (OG Republic of Montenegro no. 51/04) prescribes necessary equipment of
boats, with the special emphasis on boats which perform commercial activity – transportation of
passengers.
Institutional framework
The Maritime Security Directorate carries out technical monitoring for establishing the ability of ships
for navigation. The navigation safety inspectors from Bar and Kotor harbour master offices carry out
the monitoring over the implementation of the provisions of the Decree on boats.

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3.1.3.18.2. Short-term priorities
With the adoption of the Law on security and safety of navigation the provisions will be prescribed
related to the establishing the ability of ship for navigation in line with the directive of the EU Council
96/98/EU on maritime equipment, with amendments.
The Ministry of transportation, maritime affairs and telecommunications will, through Bar and Kotor
harbour master offices, direct its activities towards the adoption and application of standards from the
field of harbour control and security inspection and navigation safety, in accordance with Med MoU
and Paris MoU. The Maritime Security Directorate will direct the strengthening of its capacities in
accordance with the EMSA standards.
3.1.3.18.3. Mid-term priorities
The activities will start on the drafting of the Technical rules for statutory certification of maritime
equipment in accordance with the EU regulations.

3.1.3.19. High-speed railway
3.1.3.19.1. Status
Legislative framework
The existing legislative framework related to railway transport does not regulate precisely the area of
“high-speed railway“, and in that sense it would be necessary to adopt appropriate regulations.
The Agreement on establishing high performance railway network in the South-ast Europe was signed
in Thessaloniki in January 2007 and Montenegro ratified it in July 2007 (OG Republic of Montenegro
no. 44/2007). This agreement obliges Montenegro to invest efforts into the implementation of
provisions of this Agreement, primarily related to the achievement of high performances of railway
network for passenger, cargo and inter-modal transport, offering faster, higher quality and better
connections.
Montenegro, by the characteristics of its relief, is not suitable for the construction of high speed
railways, i.e. the construction of railways of such performances requires great financial resources,
which Montenegro could not secure, therefore there are no such railways.
Institutional framework
For the development of the existing capacities and the application of new transportation technologies
in railway transport the competencies lie within the Ministry of transport, maritime affairs and
telecommunications.
3.1.3.19.2. Short-term priorities
Legislative framework
The Directive 96/48/EC (31996L0048) on interoperability of Trans-European transport network of high
speeds, related to the conditions for functioning of high-speed railways, has been implemented into
the Law on safety of railway transport. Its application is envisaged as of 1st July 2008.
In this period, Montenegro will strive towards the implementation of the Agreement on establishing
high performance railway network in Southeast Europe, related to the achievement of high-
performance railway network.
Institutional framework
The Ministry of transport, maritime affairs and telecommunications is competent to harmonize future
regulations with the Directive 96/48/EC, as well as to implement these regulations in the coming
period accordingly.




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3.1.3.19.3. Mid-term priorities
For this period, the continuation is envisaged of activities related to the implementation of the
provisions of the Agreement on establishing high performance railway network in South-east Europe.

3.1.3.20. Cable cars for human transport
3.1.3.20.1. Status
Legislative framework
Cable car, funicular and ski-lifts are railways with special transportation-technical features which are
used for public transport of passengers and objects, or passengers only, i.e. objects or persons and
objects for own needs.
The new Law on safety in railway transport, which was adopted in December 2007, prescribes the
conditions for the organization of transport on cable cars, funiculars and ski-lifts, for technical
elements, as well as the conditions for the construction, reconstruction and maintenance and other
conditions for safe conducting of that form of transport.
The area of cable cars for human transport is also regulated through two bylaws:
   Regulation on technical norms for ski-lifts (OG SFRY no. 2/85);
   Regulation on technical norms for particular cable cars (OG SFRY no. 29/86).


For the area of cable cars, the year 2000 saw the adoption of the Directive of the new approach
2000/9/EC (32000L0009), Cable cars for human transport, which will be implemented into national
legislation through the amendments of the said bylaws. The plan for the adoption of these is the
Second quarter of 2009.
Institutional framework
The Ministry of transport, maritime affairs and telecommunications prescribes the conditions for the
organization of transport on cable cars, funiculars and ski-lifts, technical elements and the conditions
for the construction, reconstruction and maintenance, as well as other conditions for safe
transportation.

3.1.3.21. Construction products
3.1.3.21.1. Status
In the directives of the new approach, which require putting the CE mark onto products, in order to
prove that the use of a product is safe for humans, animals and environment, amongst others are also
construction products (89/106/EEC; 93/68/EEC)
In the Directive 89/106/EEC construction products is defined as any product manufactured with the
intention to be permanently built-in on the occasion of the execution of works on constructing high-rise
and low-rise facilities.
The Directive 89/106/EEC lays down the condition that only construction products that are harmonized
with the requirements of the Directive can be placed onto the market and put into circulation. This
means that construction products must have such characteristics that the works and facilities in which
they will be built-in, mounted or installed, can, in case of correct designing and building, satisfy
essential requirements of the Directive.
The Directive 89/106 EEC lays down the following essential requirements for construction products:
   Mechanical resistance and stability;
   Security in case of fire;
   Hygiene, health and environment;
   Safety at use;
   Protection from noise;

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   Energy efficiency and heat preservation.
Legislative framework
The Article 10 of the Law on building construction (OG Republic of Montenegro no. 55/00) defines
that construction products must, with usual maintenance, within economically acceptable time, endure
without serious damages all impacts of normal use and environmental impacts, so that a facility in
which it is built-in throughout its use meets all the requirements with regards to stability, fire and
explosion protection, hygiene and health protection, environment protection, safe use of the facility,
noise protection, energy savings and so on.
Technical regulations for individual types of facilities determine technical characteristics of
construction products in order for the facilities to meet the conditions from this law.
The Law on Standardization (OG Serbia and Montenegro no. 44/05) – taken over from the level of the
former State union, as well as all bylaws which regulate in more details the area of construction
products, i.e. technical regulations for single products or group of products with referring standards.
The Decision of the Standardization Institute of Montenegro on designating standards and similar
documents in Montenegro (OG Republic of Montenegro no. 51/07), in the item 3, it is envisaged that
the marks of the existing standards and similar documents marked by the abbreviation JUS, and SCS,
will be substituted with the abbreviation MEST, according to the rules which will be adopted by the
Institute paying attention to copyright protection.
The Law on technical requirements for products and products compliance appraisal with the
prescribed requirements (OG Serbia and Montenegro, no. 44/05) regulates also the issues related to
construction products.
Institutional framework
The Ministry of economic development of Montenegro is the institution which is competent for the
preparation of expert basis for the drafting of laws and other regulations from the filed of civil
engineering, adjusting the national legislation with the EU legislation in the area of civil engineering, as
well as for the standardization and compliance appraisal in the area of civil engineering.
The Standardization Institute of Montenegro gives the basis for the drafting of technical regulations,
establishes the infrastructure of advisory and technical bodies (technical committees) for carrying out
the activities of Montenegrin standardization and ensures the compliance of Montenegrin standards
and similar documents with the European and international standards and similar documents.
3.1.3.21.2. Short-term priorities
Legislation
The adoption of the new Law on building construction, with the provisions which define essential
requirements of buildings and construction products in accordance with the Directive 89/106/EEC, is
planned for the Second quarter of 2008.
The Fourth quarter will see the adoption of the Civil Engineering Development Strategy in
Montenegro, which will lay down global guidelines for the further development of civil engineering
sector and construction industry materials in Montenegro.
Institutions
Defining the scope of the needs and creating prerequisites for the establishing of certification and
inspection bodies and testing laboratories, as well as for the training and education of the personnel. It
is of utmost priority to establish a working body, with the task to analyse the existing situation, prepare
laws and other regulations which will enable the implementation of the EU law. The working body will
define the model and procedures for compliance certification of each product, or group of products, in
accordance with the EU requirements.




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3.1.3.21.3. Mid-term priorities
Legislation
The preparation and the adoption of the national Law on construction products which will be
harmonized with the EU Directive for construction products 89/106/EEC and 93/68/EEC, as well as
the adoption of the set of bylaws (regulations and other technical regulations), by means of which this
area will be completely regulated in accordance with directives of the new approach in this field.
Institutions
The mid-term priorities are:
   Establishing and equipping the institutions and education of personnel for carrying out construction
   products compliance appraisal procedure;
   Establishing and equipping the institutions and education of personnel for carrying out the
   inspection of construction products in the market;
   Establishing and equipping of the accredited laboratories for testing activities in accordance with
   EU legislation;
   Adoption of harmonized European standards;
   Education of construction products manufacturers and of all participants in the process
   Building construction, with the new approach in the area covered by the directives 89/106/EEC
   and 93/68/EEC.
With the purpose of increasing the abilities for the implementation of future documents and
regulations, the Ministry of economic development will continuously work on the strengthening of
administrative capacities.

3.1.3.22. Packing material and packaging waste
Status
Legislative framework
The Law on waste management (OG Republic of Montenegro no. 80/05) was adopted in December
2005, and it will be implemented as of 1st November 2008. This law regulates all types and
classification of waste, waste management planning, securing conditions for handling waste, rights,
obligations and responsibilities of legal and natural persons in waste management, conditions and
procedure of issuing permits, monitoring and other issues of importance for waste management. The
Law also defines packaging waste as packaging material remaining after the unpacking of products,
and it covers all products, which serve for protection, handling, placement and sale of another product.
Short-term priorities
The adoption is planned of regulations in accordance with the Directive on packaging and packaging
waste 94/62/EC, with the purpose of harmonization of measures for managing packaging material and
packaging waste aimed at preventing or reducing any impact of this waste and avoiding any
competitive disturbances on the internal market. Also, minimum standards are determined for packing
material and for the objectives of processing and recycling of packaging waste.
Main requirements in relation to the composition and possibility for the re-use of packaging material,
given in the directive 94/62/EC, will be covered by the planned regulation:
    Packaging material must be of minimum value and weight, still preserving the necessary level of
    safety, hygiene and acceptability for consumers,
    Content of dangerous substances in the material which the packaging material was made of must
    be reduced to the smallest possible degree, and the level of heavy metals must not exceed certain
    value,
    Packaging material must be suitable for re-use or recycling.
The packaging material must state type of material and must contain certain sign. Beside
requirements given in the directive 94/62/EC, which gives basic requirements for packaging material

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and packaging waste, it is mandatory to harmonize the same with the requirements of the directive
75/106/EEC, which deals with the size of packaging material, as well as with the regulation (EC)
1935/2004 in relation to the materials and products which get in touch food. In case packaging
material is made of wood and other materials of herbal origin, the directive 2000/29/EC is applied on
mandatory application of phyto-sanitary measures.
Mid-term priorities
Establishing packaging waste management system on the basis of the adopted regulations is a key
mid-term priority.
The Directive for managing packaging waste prescribes certain quotas for recycling (recycling of
material itself and burning) packaging waste (50 to 65% of its weight), as well as the quota for
recycling the material (25 to 45% of its weight, at least 15% of each type of material) which is required
by this procedure.
The necessary measures are:
   Organizing special collection centres and recycling centres for this kind of waste, which should be
   organized (and paid) by local authorities. Packaging waste is usually collected by private
   enterprises, or in some cases local authorities themselves.
   Appraisal of the existing systems (if any) in order to determine whether they meet the requirements
   of the European Union, as well as to avoid disturbances on the free market. The Article 6,
   paragraph 1 of the Directive 94/62/EC prescribes the quotas for burning, recycling and
   regeneration which the member states should realize within certain deadlines;
   Inclusion of the section on managing the packaging material and packaging waste in the waste
   management plans;
   Establishing the system for recovery and collection of the used packaging material and packaging
   waste and their re-use and processing;
   Establishing packaging material and packaging waste database;
   Undertaking measures for the prevention of packaging waste production and achieving set goals
   for processing and recycling of the packaging waste, including the measures which ensure the
   recycling of 50-65% of packaging waste and 25-45% of packed material in the packaging waste;
   Organizing public information campaign;
   Undertaking measures which ensure for the users of packaging material, consumers in particular,
   to get the information as to how they can contribute to re-use, processing and recycling of waste.

3.1.3.23. – 3.1.3.25. Medical devices, medical devices for active in vitro implantation,
medical diagnostic devices
Status
Legislative framework
The Law on medical devices (OG Republic of Montenegro 79/2004) in the area of medical devices
lays down health protection standards which correspond to the European standards, and to the
participants in health protection enables better conditions for development, progress and
competitiveness. The Law on medical devices represents a step towards regional harmonization
which represents a part of global harmonization in the area of medical devices. The Law is partly
harmonized with the EU regulations (90/385/EEC, 93/42/EEC and 98/79/EEC, as well as with the
European standards of the International standardization organization EN 46001 for EN ISO 9001, EN
46002 for EN ISO 9002 and EN 46003 for EN ISO 9003).
Institutional framework
For the policy of medical devices the competencies lie within the Ministry of health and the Directorate
for drugs and medical devices, which was established in November 2006 (OG Republic of Montenegro
72/06). The Directorate is organized in two sectors, with one service and department for information
system. There are currently 10 employees, with the envisaged number of 27. The qualification degree


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is partial. Three employees participated in the training at the Health Improvement Project in
Montenegro – pharmaceutical policy component, funded from the World Bank loan.
Short-term priorities
Legislation
The adoption of the amendments of the Law on drugs, which would enable the establishing of a fully
independent regulatory Agency, is planned by July 2008. It will be followed by the legal elaboration of
professionally prepared (and harmonized with the European directives) Regulation on medical devices
where there are chapters which deal with the following areas:
    Classification of medical devices
    Basic, i.e. general requirements for medical devices
    Establishing harmonization of medical devices with basic, i.e. general and specific requirements
    Accreditation/appointment of the body for determining harmonization of medical devices with
    basic, i.e. general and special requirements
    Marking of medical devices
    Conditions for production of medical devices
    Conditions for wholesale of medical devices
    Conditions for retail sale of medical devices
    Manner of issuing medical devices
    Advertising medical devices
    Clinical testing of medical devices for the use in human and veterinary medicine
    Monitoring unwanted effects of medical devices for the use in human and veterinary medicine
    Supplement 1 registration of activity
    Supplement 2 inscription of Class I medical devices into register
    Supplement 3 inscription of Class IIa, IIb and III medical devices into register
    Supplement 4 responsibility for product
    Supplement 5 request/application for the approval of clinical testing of medical devices
    Supplement 6 inscription of in-vitro diagnostic medical devices into register
    Supplement 7 request for the issuance of permits, amendments and renewal of AIMD medical
    devices.
    Supplement 8 necessary documentation for the registration of medical devices.
The Policy Strategy in the field of drugs and medical devices will be adopted in 2008. The Strategy will
define the condition in the field of drugs and medical devices, objectives, priorities and manner of the
achievement of the same, necessary resources for the efficient implementation of the rules on drugs
and medical devices, their safety, quality and efficiency, as well as accessibility. The ultimate goal is
full harmonization of the conditions for the circulation of drugs and medical devices with the Acquis
and efficient implementation of these rules through the functionality of an independent competent body
in order to enable efficient policy in the field of quality, safety and efficiency of drugs and medical
devices.
In this period, the Directorate for drugs and medical devices will be strengthened by expert personnel,
as well as by pharmaceutical sector in the Ministry of health. There is a need for continuous on-job
training in the Agency and the Ministry of health.
Mid-term priorities
Harmonization will continue of legal provisions and bylaws with the EU law. The introduction of the
quality system for the Agency for drugs and medical devices is planned by the year 2010.
Employment plan and Financial requirements – see chapter 3.1.2.3 Pharmaceuticals




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3.2. FREEDOM OF MOVEMENT OF WORKERS

3.2.1. ACCESS TO LABOUR MARKET
The conditions for the movement of labour and access to the labour market are improving in
Montenegro in an effort to follow the recommendations of the European Partnership and SAA and
abolish all discriminatory provisions concerning labour market.

3.2.1.1. Status
Legislative framework
The Law on Employment and Work of Foreigners (Official Gazette of the Republic of Montenegro, No.
11/04) lays down the terms for the employment of foreign nationals and stateless persons in
compliance with the law, collective agreement, ratified international treaties, and generally accepted
rules of international law. The employment procedure for foreign nationals depends on whether a
foreigner has a permanent or temporary residence permit in Montenegro.
In accordance with the present Law on Employment and Work of Foreigners, the job application is
filed by the employer, while in the case of an applicant who is a permanent resident, it is filed by the
applicant himself.
The Law on Foreigners, which will be adopted in 2008 and which is within the competence of the
Ministry of Internal Affairs and Public Administration, will define the procedure for determining the
quotas as defined by the Law on Employment and Work of Foreigners.
Refugee status is governed by the Law on Asylum and the Law on Foreigners (see Chapter 3.24).
The Decree on Employment of Non-resident Natural Persons (Off. Gazette of RoM, No. 28/03)
governs the procedure for the employment of non-resident natural persons. A non-resident natural
person, within the sense of this Decree, shall be considered a person who is not a permanent resident
of Montenegro or whose business and personal interests are not mainly attached to its territory. The
Decree also sets a €2.50 administrative fee for the daily work engagement of a non-resident natural
person. This Decree will apply to all foreigners regardless of their status.
In March 2004, Montenegro ratified the Lisbon Convention on the Recognition of Qualifications
concerning Higher Education in the European Region, adopted in 1997 (see Chapter 3.34).
Institutional framework
The implementation of the provisions of the Law on Employment and Work of Foreigners is monitored
by the Department for the Labour Market and Employment (8 employees) of the Ministry of Health,
Labour and Social Welfare and by the Employment Agency of Montenegro (officers in charge of
issuance of work permits to foreigners).
The Ministry of Education and Science is in charge of mutual recognition of professional qualifications.
The Ministry recognizes foreign education qualifications for the purpose of employment through the
National Information Centre (ENIC).

3.2.1.2. Short-term priorities
Legislation
The new Law on Employment and Work of Foreigners was adopted in the first quarter of 2008. In
addition, the new Law on Foreigners, prepared by the Ministry of Internal Affairs and Public
Administration and planned for adoption in 2008, introduces, among other novelties, the rules relating
to temporary residence for the purposes of employment and work, and for business and
entrepreneurial activities. This Law makes the issuance of the temporary residence licence conditional
on the previous issuance of a work permit for foreigners, which is within the competence of the
Employment Agency of Montenegro.


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The Draft Law on Employment and Work of Foreigners covers the work of foreigners (whose
employer’s registered office is outside Montenegro) under the following sections: cross-border
services, additional training of foreigners in a Montenegrin company, additional training of employees
in a company, movement of persons within a foreign company, training of foreigners, and provision of
contracted services.
The new Law on Employment and Work of Foreigners will be in compliance with the following Acquis
regulations: Regulation (EEC) No. 31968R1612 of the Council on freedom of movement for workers
within the Community, Regulation (EEC) No. 31992R2434 (1) of the Council on freedom of movement
for workers within the Community, and Directive No. 32004L038 which is an amendment to the
Regulation (EEC) No. 31968R1612 and which abolishes the previous regulations.
Along with the Law on Employment and Work of Foreigners, free movement of labour will be
additionally supported by the adoption of the National Qualifications Framework and the Law on
National Qualifications, that are now undergoing the review procedure, and that recognize national
qualifications of the persons coming to Montenegro. The laws also provide for an easier recognition of
qualifications held by our workers by other states. The Law on National Qualifications governs the
terms and the procedure for acquiring national qualifications and evaluation of certificates acquired
through non-formal education.
The Law on Recognition of Education Qualifications, governing the criteria and procedure for the
evaluation and recognition of education certificates acquired abroad, and the evaluation of certificates
acquired in Montenegro, will be adopted in the first quarter of 2008.

3.2.1.3. Mid-term priorities
Following the adoption of the Law on Employment and Work of Foreigners, the next steps for the mid-
term period include the adoption of secondary legislation under which to determine quotas.
As mentioned in Chapter 3.2.2 on coordination of the system of social welfare, new contracts with the
Republic of Hungary and the Grand Duchy of Luxembourg will be signed and the contract on social
welfare concluded with the Republic of Slovenia and the Hellenic Republic. Also planned is the
revision of contracts with FYR Macedonia, the Kingdom of Belgium and the Swiss Confederation.
In addition, the existing conventions will be revised and the new ones concluded with other states with
which there is bilateral cooperation in the area of social welfare, based on the EU legislation.

3.2.1.4. Employment plan

                                                    Existing -                 Planned number of employees
                  Institution                                       2007
                                                    planned                   2008    2009   2010   2011   2012
Ministry: HLSW – labour market and
                                                 Current              8        10      12     12     14     14
employment sector

3.2.1.5. Financial requirements

                            2008.               2009                2010                 2011           2012
Budget                11 300 000          14 100 000             14 100 000          14 100 000     14 100 000
Foreign support       1 250 000 (IPA)     1 250 000 (IPA)        1 500 000            1 500 000      1 500 000



3.2.2. COORDINATION OF THE SOCIAL SECURITY SYSTEM

3.2.2.1. Status
The Constitution of the Republic of Montenegro, Article 9, stipulates that international treaties make an
integral part of the domestic legal system and have supremacy over domestic legislation, i.e. they
prevail in cases where they govern the relations differently than the domestic legislation. Under the

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decision of the Montenegrin Parliament, Montenegro succeded to the international treaties and
agreements that had been concluded and acceded to by the State Union of Serbia and Montenegro
provided they are in compliance with Montenegro’s legal system.
Legislative framework
The legal framework on social insurance is made of bilateral contracts on social insurance which
ensure reciprocal social insurance rights related to movement of labour and their work and residence
in one of the contracting countries.
Laws that govern the social insurance system of Montenegro are the following:

   Pension and Disability Law (Off. Gazette of RoM Nos. 54/03, 39/03, 79/04, 79/04, 81/04, and
   47/07), Regulation (EEC) No. 31971R1408 of the Council on the application of social security
   schemes to employed persons and their families moving within the Community, Convention No.
   121 concerning Benefits in the Case of Employment Injury, and Convention No. 102 concerning
   Minimum Standards of Social Security.
   Law on Health Insurance (Off. Gazette of RoM, No. 39/04), which has been adopted on the basis
   of the recommendations and declarations of the World Health Organization.
   Law on Employment (Off. Gazette of RoM, No. 29/05), harmonized with the Council Decision No.
   32005D0600 on guidelines for the employment policy of the member states, and Directive No.
   32006L0054 on the implementation of the principle of equal opportunities and equal treatment of
   men and women in matters of employment and occupation, and the Regulation No. 1081/2006 on
   the European Social Fund.
   Law on Social and Child Protection (Off. Gazette of RoM, No. 78/05) – Montenegrin social
   legislation – includes pension and disability insurance, health insurance, insurance in case of
   unemployment, and the right to family cash benefits (child allowance), namely, all the areas of
   social insurance that are covered by the Regulation No. 31971R1408 on the application of social
   security schemes to employed persons and their families moving within the Community, which
   represents a basic regulation of the European Social Legislation, as well as the Regulation No.
   31972R0574 fixing the procedure for implementing the Regulation No. 31971R1408, and the
   Regulation No. 32003R0859 which expands the scope of application of the stated provisions.
Exercise of the rights within the compulsory health insurance in Montenegro is performed through the
Health Insurance Fund, which has adopted the following regulations:
   Rules on detailed terms and method of exercising specific rights within social insurance (Off.
   Gazette of RoM, No. 39/2006),
   Rules on indications and method of use of medical rehabilitation in health institutions dealing with
   specialized rehabilitation (Off. Gazette of RoM, No. 74/2006),
   Rules on composition, method of formation, and method of work of the first instance commission
   (Off. Gazette of RoM, No. 69/2006),
   Rules on the procedure for exercising the right to medical-technical aids (Off. Gazette of RoM, No.
   74/2006),
   Rules on the procedure for sending insured persons abroad for the purpose of medical care (Off.
   Gazette of RoM, No. 74/2006),
   Rules on the procedure for exercising the right to temporary work inability and the right to
   allowance during temporary work inability (Off. Gazette of RoM, No. 69/2006).šn
Montenegro coordinates its social insurance system with 25 countries, most of which are Member
States of the European Union in both implementing previous conventions on social insurance in
compliance with the said decision of the Parliament and signing new treaties that it has concluded as
an independent state and that are in compliance with the Regulation No. 31971R1408.
The Agreement on Social Insurance was signed with the Republic of Serbia on 17 December 2006,
and it comes into force on 1 January 2008. The new Agreement has been concluded with the Republic
of Hungary. Its text has been initialled and the signature is expected in the first quarter of 2008. The
new Agreement with the Grand Duchy of Luxembourg will also be concluded in the first quarter of

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2008. Some treaties are applied to the citizens of the signatories and members of their families. Most
treaties also apply to the refugees and stateless persons within the sense of the Geneva Convention.
Other treaties are based on the insurance principle, which means that they apply to all the persons
who are or were covered by the legislation of the signatories, as well as to the members of their
families.
Institutional framework
The Ministry of Health, Labour and Social Welfare is the body competent for the area of the
coordination of the social insurance system. The Ministry is also responsible for the monitoring of the
implementing parties, namely the Pension and Disability Insurance Fund – for the area of pension and
disability insurance, the Health Insurance Fund – for the area of health insurance and health welfare,
and the Employment Agency of Montenegro – for the unemployment area.

3.2.2.2. Short-term priorities
The key tasks over the coming period will be strengthening the administrative structures in charge of
the coordination of the social insurance system, which is one of the priorities until 2009. This
particularly refers to strengthening the administrative structures of the state administration that
monitors the legality of work of the relevant implementing parties (Pension and Disability Insurance
Fund, Health Insurance Fund, and Montenegro Employment Agency). This state administration is the
already mentioned Ministry of Health, Labour, and Social Welfare, and the strengthening of the
administrative structures refers to the professional development of the existing civil servants and the
development of the skills they need to participate in the drafting of legislation, as well as their
familiarizing with the European social insurance regulations that will be incorporated in the
Montenegrin legislation. A new contract with the Republic of Hungary and the Grand Duchy of
Luxembourg will be signed (I quarter 2008), and the Treaty on Social Insurance will be concluded with
the Republic of Slovenia and the Hellenic Republic. New contracts with FYR Macedonia, the Kingdom
of Belgium, and the Swiss Confederation will be revised and concluded.
Employment of foreigners will be regulated by the Law on Employment and Work of Foreigners,
whose adoption is expected in 2008. In addition, the European Social Charter will be ratified by the
Montenegrin Parliament in 2008.

3.2.2.3. Mid-term priorities
Continued work is required on further development of the human capacity and on adjustment to the
processes of accession to the European Union. It is envisaged that the current conventions will be
revised and the new ones concluded with other states with which there is bilateral cooperation in the
area of social insurance, based on the principles of the EU legislation.
Yugoslavia, that is, Serbia and Montenegro, concluded, and Montenegro implements, the social
insurance-related agreements with the following countries: Republic of Austria, Kingdom of Belgium,
Republic of Bulgaria, former Czechoslovakia (implemented since 1 December 1957 and is valid for the
Republic of Slovakia); with the Czech Republic, the Federal Republic of Yugoslavia concluded the
Agreement on Social Insurance on 3 July 2002; French Republic and Italian Republic on 14 November
1957, and implemented since 1 January 1961; Grand Duchy of Luxembourg on 1 September 2005
(new Agreement concluded in 2007 and its signing is pending); Kingdom of the Netherlands, Kingdom
of Norway, Federal Republic of Germany, Republic of Poland, Kingdom of Sweden, Swiss
Confederation, United Kingdom of Great Britain and Northern Ireland, Kingdom of Denmark, Arab
Republic of Egypt, Great Socialist People's Libyan Arab Jamahiriya, Republic of Romania (1976
Agreement between the Government of the Socialist Federal Republic of Yugoslavia and the
Romanian Government on Cooperation in the Area of Social Insurance); Panama (1975 Agreement
on Cooperation in the Area of Social Insurance); Republic of Macedonia, Republic of Croatia, Bosnia
and Herzegovina, Republic of Turkey, and Republic of Hungary.
After its independence, Montenegro signed the Agreement with the Republic of Serbia, which came
into force on 1 January 2008. All future agreements between Montenegro and other countries, as well


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                                          Government of Montenegro


as the agreements already concluded by Montenegro or Serbia and Montenegro or FRY, the drafting
of which included Montenegro, are harmonized with the Council Regulation (EC) No. 1408/71.
Montenegro is willing to conclude agreements with other countries that show their interest in it.

3.2.2.4. Employment plan

                                                                    Planned number of employees
                Institution                  2007
                                                      2008          2009        2010       2011        2012
   MHLSW – sector of pension and
 disability insurance and protection of       1        1               1         1          1              1
    veterans and disabled persons

3.2.2.5. Financial requirements

                                2008        2009             2010               2011                2012
       Budget                 10,396.00   10,396.00        10,396.00          10,396.00           10,396.00
   Foreign support




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3.3. RIGHT TO ESTABLISH COMPANIES AND FREEDOM TO PROVIDE SERVICES
In the area of the right to establish companies and the freedom to provide services, Montenegro will
ensure, for the duration of the period covered by the National Program for Integration, the observance
of the Stabilization and Association Agreement (SAA) under which the European Community and
Montenegro have undertaken to take measures necessary to gradually allow for the provision of
services by the Community companies and Montenegrin companies, or Community citizens and
Montenegrin citizens with a business seat located on the territory of a contracting party other than the
party where the person to whom the services are intended is residing.

3.3.1. RIGHT OF ESTABLISHMENT

3.3.1.1. Status
Legislative and institutional framework
Legal conditions for all the companies and institutions that intend to undertake commercial activities or
to conduct activities in the public interest in Montenegro are equal and regulated by the Company Law
(Off. Gazette of RoM, Nos. 6/02 and 17/07) and the Social Activity Law (Off. Gazette of RoM, No.
21/95).
Establishment of companies, parts of foreign companies (branch offices) and entrepreneurs in
Montenegro is regulated by the Company Law. In accordance with this Law, entrepreneurs are natural
persons who conduct business activities for the purpose of gaining profit, but do not conduct these
activities on behalf of other persons. The person who conducts activities related to an independent
profession that is governed by specific regulations is considered an entrepreneur within the sense of
the Company Law, if so stipulated by these regulations.
Foreign companies may establish a business unit, representative office, part of a foreign company and
the like that does not have the status of a legal entity, with all the obligations of the part of a foreign
company remain the responsibility of that foreign company. A part of a foreign company is registered
in the Commercial Court Central Registry by submitting the proper documentation (Article 80 of the
Company Law). The Law on Amendments to the Company Law, adopted in late 2007, eliminates the
previously noted imprecision and legal gaps and strengthens the protection of minority shareholders.
The Law is in full compliance with the Second, Tjhird, Sixth, and Eleventh Directives. It is also in full
compliance with the Directive No. 31989L0666 that regulates the requirements concerning the
establishment of branch offices (see 3.6.1.1).
The Social Activity Law (Off. Gazette of RoM, No. 21/95) governs the terms and procedure for
establishment, organization and cessation of work of the organizations dealing with social activities.
Social activities, within the sense of this Law, are the following: provision of services and creation and
placement of material, intellectual, and cultural goods in the areas of education, science, culture,
physical culture, public information, health and social and child welfare, and protection of animal
health. Public institutions are established in the areas of public interest. An institution may be
established by the domestic legal and natural persons and foreign legal and natural persons, with all
kinds of ownership structures. A public institution may be established by the state, local government
unit, and legal and natural persons. A public institution is established for the purpose of providing
services that are of public interest in the area of pre-school, elementary, secondary, and higher
education, for the protection of cultural goods, protection of health of humans and animals, basic
forms of social welfare, social care of children, fundamental scientific research, and specific research
on behalf of the social community. A public institution may also be established in other areas that the
law defines as the areas or activities in the public interest.
The terms for conducting economic and social activities are prescribed by the laws that govern the
performance of specific activities. The basic terms are: registration for conducting an activity, fulfilment
of technical terms, employment of persons with adequate professional qualifications, and possessing
a licence for conducting an activity. In Montenegro, foreign legal and natural persons are registered
and conduct their activities in compliance with special regulations.

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The General Law on Education (Off. Gazette of RoM, No. 64/02), Article 43, governs the
establishment of institutions in Montenegro. Founders of public institutions may be the state and
municipalities, while private institutions may be established by the domestic and foreign legal and
natural persons. The Law on Modifications and Amendments to the General Law on Education (Off.
Gazette of RoM, No. 49/07) lays down that foreign legal and natural persons may establish
elementary schools solely in order to educate foreign citizens. Children who are Montenegrin nationals
may attend such schools, but only as a complement to the regular elementary school, which is defined
by the Constitution as compulsory.
Establishment of private institutions in the area of higher education is defined by the Law on Higher
Education (Off. Gazette of RoM, No. 60/03). In accordance with the said law, domestic and foreign
natural or legal persons may establish private institutions, which may start operation after obtaining a
licence or accreditation. The licence defines the institution type, accredited study programs, maximum
number of students per individual study programs, and diploma degrees.
In August 2007, the Parliament of Montenegro adopted the changes and amendments to the following
set of laws in the area of education:
    Amendatory General Law on Education,
    Amendatory Law on Grammar School,
    Amendatory Law on Adult Education,
    Amendatory Law on Preschool Education, and
    Amendatory on Vocational Education.
The Law on Social and Child Welfare (Off. Gazette of RoM, No. 78/05), stipulates that, apart from the
state, institution founders may also be local government units and other legal and natural persons.
The law defines the areas within which the institutions that deal with social and child welfare may be
established (residential institutions for children and youth, residential institutions for adults - disabled
and senior citizens, and recreational institutions for children – Art. 69). Also, Article 83 of the same law
envisages that specific affairs within social and child welfare may be conducted as an entrepreneurial
sort of activity. Provisions of the said law do not provide for restrictions on foreign legal and natural
persons relating to conduct of activities in the area of social and child welfare.
The Foreign Investment Law (Off. Gazette of RoM, No. 52/00) provides equal treatment of domestic
and foreign legal and natural persons. A company may be established both by a domestic and foreign
legal and natural person, under equal terms. A foreign legal or natural person may establish a
company (alone or with other investors), invest in companies, and buy a company or its part, in
compliance with the law, as well as establish part of a company. The national treatment during the
establishment of a company or investment into a company is restricted only for the area of production
and placement of arms and military equipment, in which case a foreign investor may not have a share
larger than 49% of the share capital or property rights, or of the voting right.
In accordance with the Corporate Profit Tax Law (Off. Gazette of RoM, No. 80/04), domestic and
foreign legal entitles obtain privileges and reliefs relating to profit taxation with respect to new
employments and investments in underdeveloped areas. The Customs Law (Off. Gazette of RoM, No.
66/06), in relation to foreign investors, provides the relief of customs duty for the equipment intended
to be an investment.

3.3.1.2. Short-term priorities
Legislation and institutions
   The Law on Changes and Amendments to the Law on Higher Education will be adopted in the
   fourth quarter of 2008. This field is within the competence of the Ministry of Education and
   Science.
   The Law on Changes and Amendments to the Company Law will be adopted in the first quarter of
   2008. Its implementation is within the competence of the Ministry of Economic Development.



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3.3.2. FREEDOM TO PROVIDE CROSS-BORDER SERVICES

3.3.2.1. Status
Legislative and institutional framework
Services in Montenegro are provided by the commercial activities of entrepreneurs, companies, and
persons who have independent professions (lawyers, notaries, doctors, veterinaries, etc.). Services
are provided in compliance with the terms provided for by the laws relating the performance of
particular activities:
    Law on Law Practice (Off. Gazette of RoM, No. 79/06),
    Law on Notaries (Off. Gazette of RoM, No. 68/05),
    Law on Health Protection (Off. Gazette of RoM, NO.39/04),
    Law on Accounting and Auditing (Off. Gazette of RoM, No. 69/05),
    Law on Veterinary Services (Off. Gazette of RoM, NO. 27/07), and other laws that define the terms
    for providing specific services.
Services are also provided as services of public interest by establishing an institution in compliance
with the terms regulated by the Social Activity Law (Off. Gazette of RoM, No. 21/95), and as public
services that are performed by natural persons as their professional activity, in compliance with the
Social Activity Law and other laws that regulate the performance of non-commercial activities.
According to the Law on Foreign Trade (Off. Gazette of RoM, No. 28/04), any person (natural or legal)
may provide services in the foreign trade transactions, in compliance with its legal and business
capacity. The foreign persons that provide services in accordance with the Law on Foreign Trade
enjoy the same treatment as the domestic persons. A portion of a foreign company may provide
services on the Montenegrin territory if it has been registered in compliance with the Montenegrin
regulations.
The Law on Foreign Trade in Weapons, Military Equipment and Goods of Dual Purpose (Off. Gazette
of Serbia and Montenegro, No. 07/05) stipulates that the persons registered with the relevant ministry
may provide services in foreign transactions of weapons, military equipment and goods of dual
purpose – Ministry of Economic Development (see Chapter 3.30.1).
The issues of foreign trade and foreign investment are within the competence of the Ministry of
Economic Development. Promotional activities aimed at attracting foreign investment are the
responsibility of the Agency for the Promotion of Foreign Investments (Off. Gazette of RoM, No.
33/04), which began its operation in 2005.
In February 2007, the Council of Foreign Investors was set up with a role to actively participate in
investment policy design.
The Statute of the Engineer Chamber of Montenegro regulates the issuance of licences relating to the
design and construction works to the companies and other legal entities that operate on the territory of
Montenegro, but whose registered office is outside Montenegro. The same applies to natural persons
(engineers) to whom the Chamber issues authorizations. In both cases, the Chamber verifies, i.e.
checks the fulfilment of requirements for the issuance of licences, in compliance with the Montenegrin
regulations.
Foreign legal and natural persons are registered and conduct activities in Montenegro in compliance
with the specific regulations. The Law on Health Care (Off. Gazette of RoM, No. 39/04) prescribes that
the founder of a health institution may be the state, local government units, and domestic and foreign
legal and natural persons. As an exception to this provision, the state may found health institutions
involved in public health activities, blood transfusion, transplantation of human body parts, urgent
medical assistance, clinical centres and the Institute for Public Health (Art. 51). Further, the law
prescribes that a health worker or associate who has completed the relevant school or college abroad,
as well as the health worker or associate who is a foreign citizen, can perform health activities if they
validate their degree and obtain an appropriate license (Articles 92 and 98), in accordance with the

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general terms of employment defined by the law. The provisions of this Law do not prescribe the
specific terms for legal and natural persons relating to the provision of health services with respect to
domestic citizens.
Health care, social and child welfare issues are within the competence of the Ministry of Health,
Labour and Social Welfare.
Chapter 3.9 on financial services includes detailed provisions on the provision of banking and
insurance services, and other sectors of the capital market.
The Law on Notaries (Off. Gazette of RoM, No. 68/05), Article 8, stipulates that a foreign notary act,
under reciprocity terms, has the same legal effect as a notary act made in accordance with the said
law. The responsibility for notary issues rests with the Ministry of Justice.
Law on Law Practice (Off. Gazette of RoM, No. 79/06), Article 8, allows lawyers registered with the
register of lawyers of another country to handle cases before the judicial and other state bodies of
Montenegro under reciprocity terms. The certificate on the existence of reciprocity is issued by the
Ministry of Justice, upon a previously obtained opinion from the Bar Chamber. Matters of law practice
are within the competence of the Ministry of Justice.
The Law on Tourism (Off. Gazette of RoM, No. 13/07) governs the tourist services with respect to
foreign legal entities and natural persons. The terms relating to these services do not differ from the
terms envisaged for our citizens. The competent authority in this area is the Ministry of Tourism and
Environment Protection.
The Veterinary Law (Off. Gazette of RoM, No. 27/07) defines the terms for performing veterinary
activities in Montenegro. Veterinary activities may be performed by the veterinary workers: veterinaries
and veterinary assistants (technicians and nurses). Organizational forms for providing veterinary
services are: veterinary outpatient facility, veterinary clinic and veterinary outpatient facility for pets,
and specialized veterinary laboratories. Veterinary activities within legal veterinary entities may be
performed solely by veterinaries (doctors of veterinary medicine) who hold a license to perform
veterinary activities. The licence is issued by the Veterinary Chamber of Montenegro for a period of
five years. Detailed terms and procedure for the issuance, renewal and withdrawal of the license are
stipulated by the Chamber Statute and regulations of the Ministry of Agriculture. The requirements for
obtaining the license include a university diploma in veterinary medicine and the certificate of
vocational exam.
The provision of services is not in full compliance with the EU regulations (the possibility of provision
of cross-border services). The adoption of the new Veterinary Law, planned for 2009, will create a
basis for full compliance (see Chapter 3.12.2 – Veterinary Policy).

3.3.2.2. Short-term priorities
   Law on Spatial Planning and Construction of Objects (Ministry of Economic Development).
   Deadline: third quarter of 2008;
   Law on Foreigners (Ministry of Internal Affairs and Public Administration). Deadline: first quarter of
   2008.
   Law on Employment and Work of Foreigners (Ministry of Health, Labour and Social Welfare),
   which will be harmonized with the EU law. It will be adopted in the first quarter of 2008 (see 3.2 –
   Free Movement of Labour).
In the area of service provision, the Law on Law Practice will be amended in 2010 in order to
harmonize it with the Directives Nos. 31977L0249 and 31998L0005 and create conditions for foreign
lawyers to represent clients before the judicial bodies in Montenegro.
The implementation of the obligations from chapters 3.3.1 and 3.3.2 will not require additional budget
funds and staff.




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3.3.3. POSTAL SERVICES

3.3.3.1. Status
Legislative framework
The Law on Postal Services (Off. Gazette of RoM, No. 46/05) governs the postal traffic and the
provision of postal services in the national and international postal traffic. It covers the issues relating
to terms and procedures for the provision of postal services for all postal operators, as well as other
issues relating to the provision of postal services. Postal services are provided in compliance with the
law, the general and special terms for the provision of postal services, and acts of the Universal Postal
Union. The Law on Postal Services includes a number of guidelines provided by the Resolution C 95 –
1992 Green Book on the Single Market for Postal Services in Europe, with the EU Postal Services
Directive No. 31997L0067, and the Directive No. 32002L0039. The 1992 Green Book of the Single
Market for Postal Services defines the basic framework of postal development in the EC single market
in terms of elimination of the state influence and ensuring a high quality of postal services. The
Directives Nos. 31997L0067 and 2002L0039 set out common rules relating to: the provision of the
universal postal service, criteria for defining services that may be reserved for the operators of the
universal service, terms for the provision of non-reserved services, tariff principles, transparency of
the accounting related to the provision of the universal postal service, determining quality standards
for the universal service, and the establishment of independent national regulatory bodies.
The Rule Book on General Terms for the Provision of Postal Services (Off. Gazette of RoM, No.
29/06) governs the terms and procedures for the provision of postal services, deadlines for the
transmission and delivery of mail, density of postal network’s access points, and access to the network
of the universal postal operator. The provisions of this Rule Book also govern the provision of postal
services in the international postal traffic, unless otherwise specified by the Universal Postal Union
documents.
The Rule Book on Special Terms for the Provision of Postal Services (Off. Gazette of RoM, No. 08/07)
defines the terms and procedures for the provision of postal services by the Post of Montenegro Ltd.,
as well as the provision of postal services in the international postal traffic, unless otherwise specified
by the Universal Postal Union documents.
The Nomenclature of the Postal Services (Off. Gazette of RoM, No. 41/06) is based on the Law on
Postal Services, and it defines the types of postal services, mail weight categories, compliance zones
and value categories for postal services in national and international postal traffic.
The Rule Book on technical terms that must be fulfilled by the postal tools and other equipment of the
postal network (Off. Gazette of RoM, No. 41/06) defines the technical terms that must be fulfilled by
the postal tools and other equipment of the postal network, and terms of quality control of the postal
network.
The Rule Book on Terms and Price of Access to Postal Network of Montenegro (Off. Gazette of RoM,
No. 5/07) defines the terms and price of access to the postal network of Montenegro as a universal
postal operator. The terms of access to the postal network refer to the method of transmission of all
types of mail within the domain of universal postal service, and the price of access to the postal
network refers to the prices for the transmission of mail.
The Rule Book on Criteria for Determining Prices for Universal Postal Service (Off. Gazette of RoM,
No. 79/06) has been adopted on the basis of the Law on Postal Services and defines the criteria for
determining the prices for the provision of the universal postal service.
The Rule Book on the Level of One-off and Annual Fees for Postal Operators (Off. Gazette of RoM,
No. 72/06) defines the level of one-off and annual fees paid by postal operators.




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Institutional framework
The Ministry of Transport, Maritime Affairs and Telecommunications, which, among other fields, is
responsible for postal services, issues regulations for the implementation of the Law on Postal
Services, criteria for determining prices for the provision of the universal postal service, prices of
reserved services, assesses the fulfillment of technical requirements, supervises the implementation
of the Law, cooperates with relevant international organizations and directorates to ensure
implementation of international conventions and other agreements in the field of international postal
services.
The Agency for Telecommunications and Postal Services (AGENTEL) was set up under the Decision
of the Government of Montenegro on 8 February 2001 (Off. Gazette of RoM, No. 10/01) as an
independent regulatory body, functionally independent of all the entities that utilize telecommunication
networks, provide equipment or provide services.
Under the Law on Postal Services, the Agency powers include the issuance and withdrawal of
licences and permits to provide postal services, monitoring the prices from the point of view of their
equality and affordability, taking measures for the prevention of irregularities relating to prices,
issuance of approval to terms and prices for access to the network of universal postal operator,
issuance of approval to special conditions for the provision of postal services, monitoring the
development of postal services, keeping the register of postal operators, settlement of disputes in the
provision of access to public postal networks, as well as other powers in accordance with the law.
In Montenegro, the universal postal service is provided by the Post of Montenegro, a limited liability
company, on the basis of a special licence. The universal postal operator provides the universal postal
service and other services under the terms defined by the Law on Postal Services. In addition, it
cooperates with the international organisations and authorized companies in the area of postal traffic,
performs operations relating to exercise of rights, obligations and responsibilities in the enforcement of
the international conventions and other agreements in the area of international postal traffic, organizes
and performs accounting operations for the services in the international postal traffic with the foreign
directorates and companies, and performs operations relating to issuance, sale and withdrawal from
use of the postal stamps and payment order forms of Montenegro, while the terms and method of
issuance of postal stamps are regulated by the ministry responsible for postal operations.
In addition to the Post of Montenegro as a universal operator, the postal services market comprises
the operators that hold licences for the provision of postal services in the domain of the universal
postal services, as well as the operators who hold certificates for the provision of postal services
issued by the Agency for Telecommunications and Postal Operations.

3.3.3.2. Short-term priorities
It is planned to strengthen the legal framework by finalizing the activities towards the adoption of the
Strategy for the Development of Postal Operations, which will include the principles of the
development of postal operations and liberalization of the postal market. The Strategy’s content is
generally defined by the Law on Postal Services itself. The adoption of the Strategy is planned for the
third quarter of 2008 and contains the plan of further harmonization of the legal regulations with the
regulations of the European Union and the Universal Postal Union.
It is planned to implement the Universal Postal Union’s Plan for the Development of the Postal
Operations for the European Region and the Union of Independent States (2007-2008), which is
based on the Bucharest World Postal Strategy (BWPS) and the defined Millennium Goals.

3.3.3.3. Mid-term priorities
The Draft Strategy of the Development of the Postal Operations and the Law on Postal Services
stipulate that the Montenegrin Government shall define, for a period of 5 years, the Strategy objectives
and tasks relating to the development of postal services and the liberalization of the postal market, i.e.
define the mid-term priorities for this area.


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The adoption of the Nairobi Postal Strategy (2008-2012) is planned to take place at the next Congress
of the Universal Postal Union to be held in Nairobi (Kenya) in August 2008.

3.3.3.4. Employment plan

                                      Existing -                    Planned number of employees
            Institution                            2007
                                      planned                2008     2009        2010     2011      2012
Min. of Transport, Maritime Affairs
and Telecom. (telecommunication       Existing      2          6         6             6    6             6
 sector) – Postal Services Sector
Agency for Telecommunication –
                                      Existing      2          2         2             2    2             2
     Postal Services Sector

3.3.3.5. Financial requirements

                           2008           2009             2010               2011               2012
Budget                    256,387        274,334          293,537            314,085            336,071
Foreign support              -              -                -                  -                  -



3.3.4. INTERNATIONAL RECOGNITION OF PROFESSIONAL QUALIFICATIONS

3.3.4.1. Status
Legislative framework
In March 2004, Montenegro ratified the 1997 Lisbon Convention on the Recognition of Qualifications
concerning Higher Education in the European Region. The Convention was defined by the Council of
Europe and UNESCO, and adopted by the representatives of the countries of the Lisbon conference.
Under this Convention, which served as basis for the drafting of the Montenegrin Law on Recognition
of Education Qualifications, each signatory should recognize the acquired qualifications as similar to
those acquired in the national education system, except in cases when it can be proved that there are
crucial differences between the existing qualifications in the signatory and the acquired qualifications.
The recognition of an acquired qualification will result in access to further education in the country in
which such a qualification is recognized, under the terms identical to those valid for the applicants
from that country. In addition, the recognition will allow for the use of academic titles, under the law
and regulations of the country where the recognition is requested, and thus make access to the labour
market easier.
The Lisbon Convention obliges the Signatory Countries to provide information on their higher
education institutions and programs, and to establish a national information centre, which will, among
other things, provide information on the recognition of foreign qualifications to students, diplomats,
employers, higher education institutions, and other interested parties.

The Law on Recognition of Education Qualifications, which governs the competent bodies, criteria and
procedure for the recognition of education qualifications acquired abroad, and evaluation of education
qualifications acquired in Montenegro (Off. Gazette of RoM, No. 4/08), is based on the Lisbon
Convention on the Recognition of Qualifications concerning Higher Education in the European Region
The law defines the bodies in charge of the recognition and evaluation of education qualifications. A
department of the Ministry of Education and Science recognizes the foreign education certificates on
the acquired elementary, general secondary and vocational secondary education, and part of
education, i.e. initiated education, for the purpose of employment. The law has been developed within
the Tempus Project “Development of ENIC Centre in Montenegro”. .


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                                     Government of Montenegro


Institutional framework
For the purpose of employment, the Ministry of Education and Science, which is in charge of this area,
recognizes, through the National Information Centre – ENIC, foreign education qualifications relating
to higher education. The Lisbon Convention on the Recognition of Qualifications concerning Higher
Education was ratified in the Parliament of Serbia and Montenegro in March 2004, but the ratification
remained valid even after Montenegro had gained its independence. Thus, Montenegro adhered to the
Convention obligations and established the ENIC Centre, an organizational unit within the Ministry of
Education and Science.
The recognition of a foreign education qualification for the purpose of continuing higher education is
performed by the relevant body of an accredited higher education institution, after previously obtaining
the opinion of the ENIC Centre. The ENIC/NARIC Centre performs tasks relating to the recognition
and evaluation of higher education, in compliance with the law, as well as other affairs of national and
international significance, which are stipulated by the Lisbon Convention on the Recognition of
Qualifications concerning Higher Education in the European Region. The ENIC/NARIC Centre is the
member of the European Network of National Information Centres on academic recognition and
mobility, and it has the following competencies and tasks:
− performs the procedure of recognition of foreign education qualifications;
− provides opinions on issues that are the object of the evaluation procedure;
− provides information on the procedure for recognition and evaluation of the foreign education
    qualifications of higher education institutions, employers, professional organizations, ENIC/NARIC
    partners and other interested parties;
− is the main information centre for the issues of access to higher education institutions in
    Montenegro;
− cooperates with the ENIC/NARIC network in the development of a framework of qualifications
    concerning higher education in the European region;
− contributes to further improvement of the national education system;
− updates information on education systems, foreign education qualifications and their relation to the
    domestic education qualifications, regulations on recognition and evaluation of education
    qualifications, information on accredited institutions of higher education, terms of enrolment, etc.
− updates information on the national education system in a form defined in the Annex to the Joint
    ENIC/NARIC Charter of Activities and Services;
− conducts other affairs, in compliance with the regulations and the Joint ENIC/NARIC Charter of
    Activities and Services.
The team composed of the representatives of the Ministry of Education and Science, Ministry of
Health, Labour and Social Welfare, University of Montenegro, Employment Agency, and Economic
Chamber is working on the national framework of qualifications. A working group, coordinated by the
Ministry of Education and Science, has developed the Draft Qualification Framework and submitted it
for the public debate.
The Council for Higher Education has been established for the purpose of improving the higher
education area (Off. Gazette of RoM, No. 47/05). The Council also acts as a national accrediting body.

3.3.4.2. Short-term priorities
Legislation
In compliance with the Law on Recognition of Education Qualifications, it is planned to develop, in the
third quarter of 2008, a Rule Book that will define in greater detail the procedure for the recognition of
the education levels and professional qualifications, necessary documentation, costs, and record
keeping.
The reference level of the national qualification framework, planned for adoption in the third quarter of
2008 following the recommendations from the “European Qualification Framework”, will be a
benchmark for the national qualification frameworks in other countries, and will enable a better system
transparency and an implementation of the principle of lifelong learning. This document will contain a

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review of all the possible methods of acquiring national qualifications in Montenegro, and a number of
referential levels and their description, as well as a review of the methods of recognizing national
qualifications in Montenegro.
The Law on National Vocational Qualifications will define the terms and procedure for acquiring
national vocational qualifications, certificates, institutional infrastructure of the certification system,
competencies of technical bodies, catalogues of the vocational knowledge standards and skills for
acquiring national qualifications, application procedure for the testing of knowledge and skills, register
keeping of the issued national certificates, procedure for filing complaints and hearing complaints of
the candidates, and the supervision over the legality of work of the procedure implementers. This law
will be adopted in the third quarter of 2008.
Institutions
In the period 2008-2009, it is planned to establish the professional bodies for the certain regulated
professions, as well as to adopt the national qualification framework (NQF). The reference levels of
the national qualification framework and lists of regulated professions and corresponding professional
bodies will be established in the second and third quarter of 2008.
In order to ensure the quality of performance of certain professions, the state is obliged to provide a
legal framework for the standards and procedures relating to the performance of the given
professions. Therefore, a list of the so-called regulated professions will be established. The list will
comprise the affairs in the area of health, veterinary medicine, pharmacy, architecture, teaching, etc.
Each ministry will define, for its respective department, a list of regulated professions, as well as the
professional bodies that will establish procedures and standards that must be satisfied for the purpose
of work in a certain regulated profession. This area is yet to be arranged in order to have a clear
picture of the regulated professions and bodies that are to be in charge of implementing specific
checking procedures and issuing licenses. The EU recommendation is that there should not be more
than one hundred regulated professions for which additional terms of work need to be fulfilled.
A regulated profession is the one for which there are national legislation standards and procedure for
acceptance. The procedure is conducted by a relevant professional body appointed by a relevant
ministry. The Ministry of Education and Science will make a list of regulated professions, and other
ministries will do the same in their respective areas.

3.3.4.3. Mid-term priorities
Legislation
The new Law on Recognition of Vocational Qualifications for the purpose of working in regulated
professions in Montenegro (Harmonization with the EU Directive 2005/36/EC that is relating to the
work in regulated professions) will be adopted during 2010.

3.3.4.4. Employment plan
    Institution           Existing- planned   2007         Planned number of employees
                                                           2008     2009       2010    2011        2012
Min. of Education and
Science – Sector of       Existing            4            6        7           8        9         10
Higher Education


3.3.4.5. Financial requirements

                            2008           2009            2010               2011             2012
Budget                  50,004*          60,654*     69,567*            78,480*          87,393*
Foreign support              IPA



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3.4. FREE MOVEMENT OF CAPITAL
In accordance with the SAA, the Montenegro’s priorities are: full liberalization of the capital movement
and payments, in compliance with the EU principles and the provisions of the Article VIII of the IMF
Statute.

3.4.1. CAPITAL MOVEMENT AND CURRENT PAYMENTS REGIME

3.4.1.1. Status
Legislative framework
The two key laws in Montenegro that govern the capital movement and current payments are:

   Law on Foreign Current and Capital Operations (Off. Gazette of RoM, No. 45/05) and
   Law on Securities (Off. Gazette of RoM, No. 28/06).
The Law on Foreign Current and Capital Operations provides a legal basis for the regime of the free
flow of money and capital in Montenegro and abroad, implying that all current and capital transactions
may be freely performed by the residents and non-residents, and that there are no restrictions to the
transfer of property to and from a foreign country, as well as that there are no currency restrictions and
foreign exchange control restrictions. In accordance with the law, legal entities and natural persons
have the same treatment.
Such an established regime of freedom is provided without a negative influence on the specific
restrictions relating to business and payment operations. These restrictions are defined by other laws,
in the following areas: taxation, securities transactions, foreign exchange operations, monetary policy,
banking (deposit, credit and payment operations), property ownership, enforcement of collection,
insurance, money laundering, declaration on movement of capital for the purposes of administrative
and statistical information, and physical import and export of funds.
The law implementation did not require the adoption of secondary legislation, so that, in accordance
with this fact, there is no secondary legislation relating to a more detailed regulation of this area.
The provisions relating to the regulation of the issues of free movement of capital and current
payments, with which the law has been harmonized, are contained both in the primary and secondary
law sources of the European Union.
The primary source of the EU law, which has been used in the development of this law, is the
Consolidated Version of the Treaty on European Union of December 24, 2004. Articles 56-60 of the
said Treaty are directly relevant to the area of the free movement of capital and current payments,
whose main principles are incorporated in the law.
The secondary sources of the EU law, with which this law has been harmonized, are the Council
Directive (88/361/EEC), which regulates the mobility of capital, Directive 97/5/EC, which regulates the
issues of credit transfers outside the borders, as well as the Directive 98/26/EC, which deals with the
final settlement.
Unlike the 2000 Law on Securities, which did not include explicit provisions on the free movement of
capital in the area of securities transactions, the Law on the Changes and Amendments to the Law on
Securities, adopted in 2006 (Off. Gazette of RoM, No. 28/06), arranged this issue in such a way that it
provides a complete freedom to the movement of capital in the area of transactions with securities.
The provisions of the newly adopted Articles 112b, 112c, 112 d and 112e explicitly stipulate that:
   non-residents may freely buy and sell domestic and foreign securities in Montenegro, in
   compliance with the regulations governing transactions with securities;
   non-residents my freely issue securities, in a manner prescribed by the regulations governing
   transactions with securities;
   residents may freely buy and sell domestic and foreign securities abroad;


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   residents may freely buy and sell foreign securities in Montenegro, in a manner defined by the
   regulations governing transactions with securities;
   residents my freely issue securities abroad, provided that they previously inform the Commission
   thereon;
   Commission recognizes the prospectuses for public offering of securities by competent bodies of
   Member Countries of the Organization for Economic Cooperation and Development (OECD) and
   countries having bodies competent for supervision over transactions with securities the
   Commission has concluded the contracts of cooperation with;
   the said provisions accordingly apply to cross-border transactions with interests of the investment
   fund.
Institutional framework
The legislative part of this area is in charge of the Ministry of Finance, which is the formal drafter of
acts. The Customs Administration controls and manages records of physical entry and exit of means
of payment in and out of the country. The Central Bank prescribes the amount of cash that may be
taken in and out of the country without being declared to the Customs Administration.

3.4.1.2. Short-term priorities
Legislation
Changes to the Law on Foreign Current and Capital Operations will be adopted in the second quarter
of 2008. The changes will annul the provisions relating to the governing of the exchange relations
between Montenegro and other countries. These changes provide for the introduction of protective
measures in case of non-existence of reciprocity in current and capital transactions that may lead to
disturbance of the monetary or financial condition in the country.
Institutions
There is no need for establishment of new institutions or additional employment, as well as for
additional engagement of funds.

3.4.2. PAYMENTS SYSTEM

3.4.2.1. Status
In early 2005, a modern interbank payment system was implemented in Montenegro, as the basis for
the country’s payment system infrastructure. After years of reform of the payment system, the first
objective of the reform, as defined by the National Development Strategy, has now been successfully
accomplished, i.e. a modern, secure and efficient payment system, free of monopoly, has now been
established.
The interbank payment system, whose owner and operator is the Central Bank, enables its
participants to use an efficient and secure method of payment processing in the country by means of
two subsystems:
– RTGS of subsystems, which settles individual electronic payments on the gross principle in real
    time, and
– DNS of sub systems, which settles individual electronic payments on net principle, in designated
    time.
The implementation of a modern interbank            payment system, based on generally recognized
international standards and principles (IBAN        account standard, SWIFT message format, CPSS
principles, etc.), has created preconditions for   further development and connection of the domestic
payment system with other payment systems          (TARGET, SEPA, payment systems of other central
banks, etc.).
The mission of FSAP (Financial Sector Assessment Program) in Montenegro, which was carried out
for the first time in 2006 by the World Bank and IMF to assess the payment system, established that
the Central Bank’s interbank payment system was generally harmonized with the “Core Principles for

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Systemically Important Payment Systems”, of the Committee on Payment and Settlement Systems of
the Bank for International Settlements (BIS), from Basel.


Legislative framework
The payment system of Montenegro is governed by the Law on Central Bank (Off. Gazette of RoM,
no. 47/01) and by 11 bylaws, which the Central Bank adopted within the payment system reform, and
they are:
    Decision on Domestic Payment Operations (Off. Gazette of RoM, No. 33/05);
    Decision on Uniform Structure of Identification and Classification of National Payment Operations
    Accounts (Off. Gazette of RoM, No. 78/04);
    Decision on Uniform Structure of Identification and Classification of Accounts for Implementation of
    International Rules and IBAN Standards (Off. Gazette of RoM, No. 74/06);
    Decision on Opening, Managing and Annulling National Payment Operations Accounts, with
    Annex (Off. Gazette of RoM, No. 6/05);
    Decision on Form, Content and Use of Uniform National Payment Operations Instruments, with
    annexes 1 and 2: “Payment Codes” (Off. Gazette of RoM, No. 6/05);
    Decision on Terms and Manner of Performing National Payment Operations by an Authorized
    Agent (Off. Gazette of RoM, No. 78/04);
    Decision on Manner of Forced Collection from the enforcement debtor Account (Off. Gazette of
    RoM, No. 6/05).
    Decision on Manner of Performing Interbank Payments from Settlement Accounts of Participants
    in Interbank Payment System (Off. Gazette of RoM, No. 69/05);
    Decision on Electronic Manner of National Payment Operations with annexes 1 and 2 (Off.
    Gazette of RoM, No.78/04);
    Decision on Central Bank Fees for Performing National Payment Operations Activities (Off.
    Gazette of RoM, No.39/05), which annuls the Decision on Central Bank Fees for Performing
    National Payment Operations Activities (Off. Gazette of RoM, No. 78/04);
    Decision on Statements Submitted to Central Bank by Other Banks (Off. Gazette of RoM, nos.
    9/04 and 24/05).

The current regulatory framework provides a safe and efficient functioning of the payment system in
the country and does not represent a restricting factor to its further development.
The legal basis defines, in a clear and accurate way, the rights and obligations of operators,
participants and regulators.
Institutional framework
According to the Law on Central Bank, the Central Bank of Montenegro is responsible for the
establishment and maintenance of a sound banking system and for efficient payment operations in the
country.
The Central Bank, as the owner and operator of the interbank payment system, performs payment
operations for its clients and performs accounting and settlement for the participants in the interbank
payment system. The mentioned operations are organized within the Payment Operations Department
and currently carried out by 13 out of 16 staff envisaged by the systematization of work posts.
The competencies of the Central Bank include the regulation and control of implementation of
regulations on payment operations in the country. These activities are organized within the
Department for Regulations and Payment Operations Control.
In accordance with the Law on Executive Procedure, the Central Bank performs forced collection from
the accounts of enforcement debtors on the basis of executive rulings of courts and other competent
bearers. The mentioned affairs are organized within the framework of the Payment Operations
Departments. 14 out of 16 employees as defined by the systematization of work posts are currently
involved in carrying out these activities.

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The competencies of the Central Bank of Montenegro in the implementation of the “Core Principles for
Systemically Important Payment Systems”, as prescribed by the Committee on Payment and
Settlement Systems of the Bank for International Settlements (CPSIPS), are mostly harmonized with
the four basic competencies of the Central Bank.
All the mentioned operations are financed from the fee for performing payment operation activities,
which the Central Bank charges to its clients, and the fee for performing forced collection.

3.4.2.2. Short-term priorities
Legislation
   Adoption and enforcement of the Law on National Payment Operations – in 2008.
   Development and enforcement of the secondary legislation after the adoption of the law – in 2008.
   Development of the Draft Law on Electronic Money Instruments.
The Law on National Payment Operations will govern the issues of funds transfer, interbank transfer
settlements, issuance of electronic means of payment, and establishment and control of payment
operations. During the preparation of this law, a voluminous documentation basis has been used: the
comparative law solutions; the most important documents of the Committee on Payment and
Settlement Systems of the Bank for International Settlements; and the recommendations and
directives of the European Union.
The central part of the law is harmonized with the Acquis Communautaire – secondary legislation that
regulates this matter (along with observation of the specific features of the banking, economic and
financial system of Montenegro), especially the following:
– Directive 98/26/EC on Settlement Finality in Payment and Securities Settlement Systems,
– Guidelines ECB 2005/16/ECB and 2006/11/ECB on Trans-European Automated Real-time Gross
    settlement Express Transfer system (TARGET),
– Commission Recommendation 87/598/EC – concerning European code of conduct on electronic
    payment,
– Commission Recommendation 97/489/EC concerning transactions by electronic payment
    instruments and in particular the relationship between issuer and holder in Montenegro, and
– Directive 2000/46 EC on Electronic Money.
Working version of the law regarding the legal and technical accession has been developed based on
the EU standards. To that extent, primary care was devoted to the documents entitled “Basic Guide to
the Regulatory Activities of the European Union” and “Assessing the Impacts of Proposed Laws and
Regulations”.
Institutions
The activity holder regarding the development of the Law on National Payment Operations and the
supporting secondary legislation is the Central Bank of Montenegro.

3.4.2.3. Mid-term priorities
Legislation
During this period there will be a continuation and intensification of the activities relating to the
harmonization of the Montenegrin regulations with the EU regulations, acts of the Committee on
Payment and Settlement Systems of the Bank for International Settlements, and international practise
and standards in this area, along with the observation of the specific features of the banking,
economic and financial system of Montenegro.
Institutions
The Central Bank of Montenegro will continue and intensify the activities on the ongoing improvement
of the national payment system functioning, including the creation of the preconditions for the
technical-technological connection of the Montenegrin payment system with the relevant EU payment


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                                               Government of Montenegro


systems, primarily TARGET (Trans–European Automated RTGS Express Transfer System), and its
integration in the framework of the SEPA (Single European Payment Area).
Employment and training plan
Employment dynamics will depend on the manner of organization of the Central Bank’s activities
relating to accession process.

3.4.3. PREVENTION OF MONEY LAUNDERING
The Directorate for the Prevention of Money Laundering and Terrorist Finance started work in 2004 as
a financial intelligence unit of administrative type. This typology implies that the Directorate’s powers
are to collect and analyse information and data collected from reporting entities, state agencies and
foreign financial-intelligence units (where the case involves a foreign party). Where there is reason to
believe that the case involves money laundering, terrorist finance, or another crime, the case is then
delivered to the line state bodies (police and/or prosecution) together with all the supporting
information collected. It is expected that until 2012 the Directorate shall strengthen its role in the
system of combating money laundering and terrorist finance in accordance with its new powers as
envisaged by the latest law governing this issue as well continue its intense regional and international
cooperation.

3.4.3.1. Status
Legislative framework
The adoption of the Law on the Prevention of Money Laundering (Official Gazette of the Republic of
Montenegro, No. 55/03) in 2003 was the first time Montenegro regulated this issue in a special law. It
is the first law ever to govern in Montenegro the measures and activities aimed at the prevention of
money laundering. The Law is in compliance with the Directive 91/308/EEC on the prevention of the
use of the financial system for the purpose of money laundering and the Directive 2001/97/EC.
The amendatory law of March 2005 (Official Gazette of the Republic of Montenegro, No. 17/05)
included provisions on the prevention of terrorist finance. The name of the law changed accordingly
and now reads the Law on the Prevention of Money Laundering and Terrorist Finance. The Law is in
conformity with FATF19 Recommendations 40+8+1.
To ensure proper implementation of the Law on the Prevention of Money Laundering and Terrorist
Finance (as of 18 March 2005), the following secondary legislation has been adopted:
   - Rules on reporting data on cash transactions exceeding €15,000 and suspicious transactions
       to the Directorate for the Prevention of Money Laundering, published in the Official Gazette No.
       55/05 of 5 October 2005. They govern the way in which data are reported on cash transactions
       exceeding the treshold of €15,000 and a way in which data on such suspicious transactions
       should be delivered.
   - Rules on the work of reporting entities, internal control, data protection, methodology of
       maintenance of data registers and training of employees (Official Gazette No. 55/05 of 5
       October 2005, that regulates the manner of work of a reporting entity, data protection, internal
       control, record keeping and training of employees.
In November 2007, the new Law on the Prevention of Money Laundering and Terrorist Finance was
adopted (Off. Gazette, No. 14/07) to regulate the measures and activities aimed at the prevention of
money laundering and terrorist finance in accordance with international stadards in this field. Namely,
the issues related to money laundering and terrorist finance are extremely dynamic by nature mostly
for reason of the new and sophisticated methods used in the commission of such crimes. An adequate
response to that consists in continued adoption of international standards and recommendations that
are incorporated into national legilsation. That is why frequent amendments or modifications of
national legislation in this field have become quite common.


19
     FATF, International Organization for Fighting Money Laundering and Terrorist Finance with its headquarters in Paris.

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The new Law is fully harmonized with Directive 2005/60/EC of the European Parliament and the
Council on the prevention of the use of the financial system for money laundering and terrorist finance,
as well as with UN Convention against Corruption 2003.
The new Law on the Prevention of Money Laundering and Terrorist Finance, adopted in November
2007, incorporates the list of the most important EU regulations on this subject matter.
Money laundering, international terrorism and terrorist finance are qualified as criminal offences under
the Criminal Code of Montenegro (Official Gazette of the Republic of Montenegro, No. 70/03 and
47/06).
Article 268 of the Criminal Code deals with money laundering and lists the forms that money
laundering can be manifested in as well as the range of sanctions imposed. The sanctions depend on
the form of offence and the roles of offenders in the commission of the crime (whether the offender
took part in the commission of the predicate crime or in money laundering only) and range from six
months to twelve years. The crimes involving the amount exceeding €40,000; offenders that through a
banking, financial or other commercial transaction conceal the method of procurement of money or
other property that is known to originate from a criminal offence; as well as offenders who are at the
same time either direct perpetrators or accomplices in a predicate crime, can be subject to seizure of
money and property.
Article 447 of the Criminal Code defines the criminal offence of international terrorism. Under this
article, „a person who commits abduction or other act of violence, causes explosion, fire or takes other
dangerous action or threats using nuclear, chemical, bacteriological or other similar instrument with
the intention to cause harm to a foreign country or an international organization“ shall be punished by
imprisonment to a term ranging from three to fourty years. Article 448 of the Criminal Code regulates
taking hostages. This crime is sentenced by imprisonment to a term from two to forty years. The crime
of terrorist finance is regulated by Article 448 Criminal Code. This article provides for the imprisonment
from one to ten years, as well as the seizure of proceeds of crimes.
Institutional framework
The responsibility for the prevention of money laundering and terrorist finance rests with the
Directorate for the Prevention of Money Laundering and Terrorist Finance as an independent state
agency supervised by the Ministry of Finance. The Directorate for the Prevention of Money Laundering
and Terrorist Finance started operation on 5 February 2004. It is a financial intelligence unit of
administrative type, which means that it gathers and analyses data, information and documents and
delivers them to the relevant state bodies.
The Directorate reports annually to the Ministry of Finance and prepares reports for the general public
at least once a year. Citizens can report suspicious transactions by submitting their initiative (by mail,
telephone, telefax, email).
The Directorate is organized in three departments (Analytics Department, Suspicious Transactions
Department and Department of International and Internal Cooperation) and the General and Financal
Affairs Service. The Regulation on internal organization and systematization dated 13 January 2005
envisages nineteen work posts. The Directorate now has twelve employees and four contract trainees.
Out of the twelve employees for an unlimited term, nine are with a university degree, and three with
high school qualifications.
The Directorate for the Prevention of Money Laundering and Terrorist Finance has been a fully
fledged member of the Council of Europe Committee responsible for the prevention of money
laundering and terrorst finance – MONEYVAL since 5 June 2007. The Directorate became a member
of EGMONT group on 29 June 2005.
Civil servants and employees of the Directorate regularly take part in international events
(conferences, seminars, round tables, workshops, etc) on the issues of prevention of money
laundering and terrorist finance as well as in the work of MONEYVAL (Council of Europe Committee
responsible for the prevention of money laundering and terrorist finance) and EGMONT group (over a
hundred financial intelligence units).

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                                      Government of Montenegro


Fight against money laundering and terrorist finance resembles concentric circles, where the first
circle represents the reporting entities that have the duty under the law to report suspicious
transactions as well as all cash transactions exceeding €15,000 and all connected transactions whose
value exceeds €15000. Among the reporting entities, banks play a very important role as institutions
through which most of such transactions are carried out. Suspicious transactions are recognized as
such by reporting entities on the basis of a list of indicators. As the Central Bank of Montenegro is in
charge of controlling the banking sector, this means that the Central Bank, together with other relevant
bodies and the Directorate for the Prevention of Money Laundering, takes part in updating the list of
indicators.

3.4.3.2. Short-term priorities
Legislation
The Rules on internal organization and systematization will be adopted in the first quarter of 2008 to
redefine the organizational structure of the Directorate and the number of staff working there. The
internal organization must be adjusted in view of the new obligations of the Directorate under the new
Law on the Prevention of Money Laundering and Terrorist Finance.
The Regulation on the work of reporting entities, internal control, data protection, methodology of data
register maintenance and training of employees must be harmonized with the new Law. This process
is scheduled to end in the first six months of 2008.
The Regulation on the service of data on cash transactions exceeding €15000 and suspicious
transactions on the Directorate for the Prevention of Money Laundering must be harmonized with the
new Law. This will be finalized over the first six months of 2008.
The list of suspicious transactions indicators is a document that is subject to change. Its updating
depends on new typologies of money laundering registered in practice as a result of thorough analysis
by both the Directorate and reporting entities as defined by the law. That is why it is impossible to
precisely define the deadline by which the Directorate will initiate the updating of the list of indicators
of suspicious transactions, as the previous updating took place in mid-March 2007.
Institutions
The Law (adopted on 29 November 2007) and Regulation on internal organization and
systematization of posts to be adopted in early 2008 both envisage that two new departments are to
be set up – Department for the control of reporting entities and the Department for information
technology and data import. The new departments are set up with the aim to effectively fulfil the
commitments arising from the new Law. This means that the Directorate should have thirty-four
officers once these acts are adopted. Ongoing training and professional development of employees
will be organized.

3.4.3.3. Mid-term priorities
Mid-term priorities, defined following the recommendations from the European Partnership, include the
following:
   -   Continued professional development of employees, and
   -   Continued cooperation with relevant international institutions, FATF first of all, so as to protect
       the financial system from laundering the proceeds of crime and prevent terrorist finance, in
       accordance with Stabilization and Association Agreement.




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3.4.3.4. Employment plan

             Institution                   Existing       2007                 Planned number of employees
                                          - planned                     2008     2009         2010      2011          2012
 Directorate for the Prevention of
 Money Laundering and Terrorist
             Finance                       Existing        12            34       34           34         34           34

3.4.3.5. Financial requirements

                             2008            2009                2010                   2011                   2012
       Budget              390,000.00     712,996.64          709,016.48            710,000.00             712,000.00
  Foreign support              -                -                   -                     -                     -
Note: The projected budget funds by individual years refer to the cost of newly recruited staff under the new Regulation on
Internal Organization and Systematization of Work Posts.




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                                    Government of Montenegro



3.5. PUBLIC PROCUREMENT
Following the adoption of the new Law on Public Procurement (Official Gazette of the Republic of
Montenegro, No. 46/06) in July 2006, its strict implementation, and the setting up of the required
institutional framework, all the prerequisites are now in place to fulfill the commitments arising from
SAA.

3.5.1. Status
Legislative framework
The Law on Public Procurement is harmonized with the Directive 32005R0018 for the classical sector
of public procurement and Directives 31989L0666 and 31992R0013 in the area of protection of rights.
During the drafting process, the working group enjoyed the technical assistance of SIGMA/OECD,
EAR, OSCE, and SPAI/RSLO.
The Law on Public Procurement provides for the new institutional framework, i.e. setting up of an
administrative body responsible for public procurement affairs (Public Procurement Directorate) and
the state commission responsible for the control of the public procurement procedures (Commission
for the Control of Public Procurement Procedure). The law introduces new, simpler procedures,
precisely defines value categories, as well as tenders, and lays down the obligation to prepare public
procurement plan and publish it on the web page of the administrative body responsible for public
procurement affairs at the beginning of each year where the value of procurement exceeds €100000.
The new law replaces the three commissions (for the opening, assessment, and reward) by a single
commission (commission for opening and assessment of bids) that now administers the public
procurement procedures following the new public procurement methodology.
Under the new Law, all bidders sign the Report on opening and assessment of bids that they are
served within three days of the opening of bids, which is to avoid any room for abuse. The law
provides for a number or eligibility evidence that the bidders must submit together with their bid. The
contracting authority has the power to seek clarification from the bidders where their bid contains and
unusually low price or an unusually short a term, which is meant to avoid dumping of prices and abuse
in this part of the procedure. In addition, the law specifies the kind of cases in which the contracting
authority has the duty to annul the public procurement procedure.
Under Art. 76 of SAA, Law on Public Procurement, EU companies founded in Montenegro or outside
are allowed to have access to contract award in Montenegro on the same terms as those applied to
Montenegrin commercial entities. By ensuring that a large number of decisions must be published on
the web page of the public administration body responsible for public procurement (Public
Procurement Directorate), the Law also ensures greater transparency, which is also in accordance
with Art. 76, SAA.
The obligation under Art. 41(2) of the Interim Agreement dealing with the harmonization of public
procurement legislation regulating communal services will be implemented in national legislation with
the adoption of the new Law on Public Procurement of Communal Services during 2010-2011 or with
the amendments of the existing Law on Public Procurement in 2010-2011, which will ensure national
public procurement legislation is in compliance with Directive 32004R0017.
The Law on Public Procurement was duly followed by secondary legislation (implementing acts and
sample forms – published in the Official Gazette of the Republic of Montenegro, No. 71/06), in
compliance with the provisions of the Law and the Directive 32004R0018. Secondary implementing
regulations and sample forms include the following :
   - Rules on the form, content, and methodology of issuance of certification to guarantee due
        settlement of financial obligations arising from public procurement,
   - Sample form: Terms and methods of public procurement value assessment,
   - Sample form: Public procurement plan,
   - Sample form: Public invitation for bids,
   - Sample form: Form of tender notice,
   - Form: Contract award decision,

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   -   Form: Contract award decision in negotiated procedure without prior publication of tender
       notice,
   -   Form: Decision on small value procurement,
   -   Form: Decision to cancel a public tender,
   -   Sample form: Tender documents for supplies,
   -   Sample form: Tender documents for works,
   -   Sample form: Tender documents for services,
   -   Sample form: Form of the Record on public opening of bids,
   -   Sample from: Form of the Record on examination, assessment, and comparison of bids,
   -   Sample form: Form for the report on public procurement procedure,
   -   Sample form: Request form for submission of bids by shopping method, and
   -   Sample form: Methodology of keeping records on public procurement.
Institutional framework
The responsibility for public procurement rests with the Public Procurement Directorate, Ministry of
Finance, as the ministry responsible for public procurement under the law, and the Commission for the
Control of Public Procurement Procedure, responsible for the supervision of legality and effectiveness
of public procurement generally.
The Public Procurement Directorate was established under the Decree on the amendments of the
Decree on the organization and manner of work of public administration (Official Gazette of the
Republic of Montenegro, No. 72/06). Its director was appointed on 31 May 2007, so that it actually
started operating on 1 June 2007. The Regulation on internal organization and systematization
stipulates that the Directorate shall have fifteen civil servants and employees in the Directorate. The
Directorate now has twelve civil servants and employees.
Pursuant to Art. 17 of the Law on Public Procurement and Art. 42a of the Decree on the Organization
and Manner of Work of Public Administration, the Public Procurement Directorate has the powers to:
   1) take part in drafting legislation, secondary legislation and other regulations on public
       procurement;
   2) design the appropriate sample forms for the implementation of the Law;
   3) monitor and analyse the functioning of the public procurement system from the point of view of
       its compliance with European Union law and suggest measures by which to ensure
       compliance;
   4) issue approval to contracting authorities as to the type of procedure selected in cases defined
       by this law;
   5) provide advisory and consultancy services to contracting authorities, upon their request, with
       respect to public procurement,
   6) take part and cooperate in organizing training for staff working in public procurement;
   7) publish tender notices and contract award decisions on the web page of that public
       administration body in cases envisaged by this law;
   8) improve the system whereby contracting authorities and bidders are informed about the public
       procurement regulation, publish and distribute relevant expert literature;
   9) prepare a model of tender documents and contracts for typical public procurement;
   10) initiate and encourage the development of practice of e-procurement and communication in
       public procurement;
   11) carry out international cooperation with institutions and experts in public procurement;
   12) inform the State Audit Institution and submit complaints to other relevant bodies about the
       cases of violation of public procurement procedures that it learns of during the performance of
       duties within its competence;
   13) collect data from contracting authorities and keep records;
   14) prepare, publish, and update the list of contracting authorities on its web page;
   15) prepare basis for the establishment of record and official lists of bidders on the basis of data on
       concluded and executed public procurement contracts;
   16) monitor public procurement procedure and ensure public interest in such procedures;
   17) issue bulletins on public procurement;

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                                     Government of Montenegro


   18) submit an annual report on public procurement in Montenegro to the Government;
   19) perform other activates, in accordance with the law.
Upon request of the Directorate, every contracting authority and bidder has the duty to allow insight to
authorized officer of the given body into the documentation which forms part of the public procurement
procedure.
The training of officers of the Public Procurement Directorate was organized through several training
programmes provided by SIGMA/OECD, training organized in Turin by ILO and RESPA, as well as
training organized by the Human Resources Development Agency of Montenegro.
The Commission for the Control of Public Procurement Procedures is an independent and
autonomous body. It has a president and two members. The president and the two members of the
state commission are appointed by the Government. The state commission, pursuant to Art. 93 of the
Law on Public Procurement, is authorized to review complaints received by bidders about the public
procurement procedures and issue decisions on them; examine proper implementation of the Law and
suggest and take measures by which to correct irregularities detected with the aim to ensure
competitiveness of bidders and transparency of the public procurement procedures; define principled
opinions to ensure uniform implementation of the Law and carry out other activities, in accordance
with this Law.
The Public Procurement Commission, established in October 2001, continued its work under a new
name – Commission for the Control of Public Procurement Procedures, under the quoted legal
provisions (Art. 93). The drafting of the Regulation on internal organization and systematization of this
Commission is now underway. The Public Procurement Commission currently has four staff, and once
the said Regulation is adopted, new officers will have to be recruited so as to build the administrative
capacity of this body.
The training of the president, members, secretary and staff of the Commission has been provided
through CARDS training programme including two study visits (to Italy and European Commission in
Brussels, as well as European Court of Justice in Luxembourg). The secretary of the commission took
part in the training organized in Turin by ILO and RESPA as a national expert. In addition, the Human
Resources Development Agency organizes monthly training sessions in public procurement training
for civil servants and employees.

3.5.2. Short-term priorities
Legislation
   in 2008 and 2009, secondary legislation and sample forms adopted in accordance with the Law on
   Public Procurement will be reviewed for amendments and modifications to ensure a more effective
   implementation of the Law,
   assistance is expected through IPA Programme for 2008 and 2009 in harmonizing legislation,
   training of the Public Procurement Directorate staff as well as of public procurement officers in
   contracting authorities and bidders, equipping the Public Procurement Directorate, spreading
   information on public procurement, and in organizing an awareness raising campaign in this sector
   by drafting relevant documents (brochures, magazines, publications, bulletins...).
Institutions
Human capacity must be built by recruiting more staff and training them adequately for the activities of
the Directorate. We also need to provide additional training to enhance knowledge of comparative
legislation, analyse examples from practice, as well as exchange experience and study visits. Training
will be provided through IPA programme and the training organized by the Human Resources
Development Agency of Montenegro and other organizations and institutions relevant for this sector.
More staff must also be recruited and trained for the Public Procurement Commission to ensure
comparative legislation is examined, cases from practice analyzed, and experience exchanged.
Training will be conducted through IPA programme as well as the training organized by the Human
Resources Development Agency.

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3.5.3. Mid-term priorities
Legislation
   -     Draf the Amendatory Law on Public Procurement so as to bring it in line with Directive
         32004R0018 that lays down new procedure for competitive dialogue and a dynamic purchase
         system, thresholds for public procurement value and terms for public invitation for bids for
         2010-2011.
   -     Directive 32004R0017 will be incorporated into the national legislation either through the
         amendments to the Law on Public Procurement or through the adoption of the new Law on
         Public Procurement that will refer to the service sector (communal – utility sector), 2010-2011.
         Also, this harmonization process will also ensure harmonization with the new directives in the
         area of rights protection.
Institutions
Further training of staff in key institutions – Public Procurement Directorate of Montenegro and
Commission for the Control of Public Procurement.

3.5.4. Employment plan

                                    Existing -                     Planned number of employees
            Institution                             2007
                                    planned                 2008     2009       2010     2011      2012
 Commission for the control of
                                     Existing         4       6        8         8         8         10
 public procurement procedure
Public Procurement Procedure         Existing        12      16       18         18       20         21

3.5.5. Financial requirements
Commission for the Control of Public Procurement Procedure
                                  2008                  2009        2010         2011            2012
Budget                           196,00                250,00       250,0       280,00           310,0
                          IPA -SIGMA/OECD        IPA- SIGMA/OECD
Foreign Support
                               1,250,000              1,250,00


Public Procurement Directorate
                                  2008                  2009        2010        2011             2012
Budget                        256,012.76              350,000      420,000     480,000          550,000
                          IPA -SIGMA/OECD        IPA- SIGMA/OECD
Foreign Support
                               1,250,000             1,250,000




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                                     Government of Montenegro



3.6. COMMERCIAL LAW

3.6.1. COMMERCIAL LAW

3.6.1.1. Status
Under Article 53 of Stabilization and Association Agreement, Montenegro has undertaken to simplify
the procedures for companies initiating business activities on its territory. To that end, with the
enforcement of this Agreement, Montenegro will grant:
-   in the case of establishment of EU companies on the territory of Montenegro, the treatment that is
    not less favourable than that granted to its own companies or any other company from a third
    country, depending on which one is better;
-   in the case of business operation of aleardy existing EU companies and their branches on the
    territory of Montenegro, the treatment that is not less favourable than that granted to its own
    companies and their branches, or any other subsidiary or branch of any company from any third
    country, depending on which one is better.
As for financial services, irrespective of any other provisions of this Agreement, no state party will be
prevented from taking measures, including measures for the protection of investors, depositors,
insurees, or parties to whom a provider of financial services has fiduciary committment or measures
ensuring integrity and stability of the financial system. Such measures may not be used as a tool by
which to avoid obligations that a state party has undertaken under this Agreement (Article 54).
The Action Plan for the implementation of recommendations from European Partnership 2007
envisages the promotion of fulfillment of financial reporting requirements, particularly by financial
institutions, as well as by companies listed on stock exchange.
Legislative framework
The Companies Act (Official Gazette of the Republic of Montenegro, No. 6/02) governs the forms of
business activities and their registration. As for its compliance with the European Union law, this Law
is harmonized with Articles 44, Para. 2, Line g, and Article 48, Para. 2 of the European Union Treaty,
as well as the Twelfth Directive 31989L0667. The Law is partially compliant with the First, Second,
Third, Sixth, and Eleventh Directive. The Law is not in compliance with the EEC Council Decree
31985R2137 and EC Council Regulation 32001R2157.
The Amendatory Companies Act (Official Gazette of Montenegro, No. 17/07), adopted in late 2007,
eliminates the previosly noted points of imprecizion and legal gaps and strengthens the protection of
minority shareholders. The Act is in full compliance with the Second, Third, Sixth, and Eleventh
Directives.
Commercial law is also governed by the Instructions on the work of the Central Register and entry
forms (Official Gazette of the Republic of Montenegro, No. 43/03) and Company Insolvency Law
(Official Gazette of the Republic of Montenegro, Nos. 6/02, 2/07) that regulate the procedures for
bankruptcy, reorganization, and personal management in bankruptcy procedures. This Law is
harmonized with the Council of Ministers Instruction 32000R1346 on insolvency procedures.
Additional legislation adopted in accordance with this Law also includes Regulation on the
requirements for the issuance of approval for the appointment of trustee in bankruptcy (Official
Gazette of the Republic of Montenegro, No. 66/06) and the Programme for the examination of
applicants for the post of trustee in bankruptcy (Official Gazette of the Republic of Montenegro, No.
13/03).
The Law on Publication of Regulations and Other Acts (Official Gazette of Montenegro, No. 05/08)
provides for the publication of the Official Gazette of Montenegro in electronic and print form as well as
that the electronic form of the Official Gazette shall be free of charge, which is in accordance with the
First Directive 31968L0151, as revised and amended by Directive 32003L0058.



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Institutional framework
Corporate management issues rest within the competence of the Ministry of Economic Development,
Sector for Industry and Entrepreneurship. Responsible for these affairs are also the deputy minister
and two officers in the department for the development of small and medium sized companies. In
addition, there is a lawyer working on legislation in the department of normative and legal affairs within
the legal and inspection affairs sector.
The Register of companies and entrepreneurs is kept by the Central Register of Podgorica, which is
an administrative and not a judicial body. The Register currently employs fifteen civil servants,
including a registrar. The registrar is appointed by the chief justice of the Commercial Court in
Podgorica.

3.6.1.2. Short-term priorities
The Law on Publication of Regulations and Other Acts provides for the publication of the Official
Gazette in the electronic and print form, as well as that the electronic form of the Official Gazette of
Montenegro shall be free of charge, as prescribed by the First Directive 31968L0151, revised and
amended by Directive 32003L0058. The project of the electronic issue of the Official Gazette is
expected by July 2009.

3.6.1.3. Mid-term priorities
Legislation
A new Companies Act will be adopted by late 2010 and be in compliance with:
-    First Directive 31968L0151, as amended by Directive 32003L0058. It will be harmonized with the
     provisions imposing an obligation that documentation for the central register should also be
     submitted in the electronic form, as well as the obligation that any person may be served copies of
     documentation in the electronic form too.
-    EC Council Decree 31985R2137 on European economic interest group, where such provisions
     would apply as of the date of Montenegro’s accession the EU.
-    Regulation of EC Council 32001R2157 on the Statute of European Companies, where such
     provisions would apply as of the date of Montenegro’s accession to the EU.
-    Other directives and regulations adopted in the EU before the adoption of either the amendments
     to the existing Companies Act or of a new companies act.
Institutions
There is no plan to increase the number of staff working on these issues in the Ministry of Economic
Development.
There is a plan to hire a civil servant in Niksic, Bijelo Polje, Pljevlja, Bar, and Kotor respectively. These
people would be receiving documents for the Central Register, which will ensure a simpler and
cheaper registration for persons from remote areas in Montenegro. These officers would be located in
one of the existing courts in the towns listed above. The provision of funds for their salaries would
remain the responsibility of the Central Register. Such funds are estimated at €50,000 annually.

3.6.1.4 Employment plan

                                                                     Planned number of employees
       Institution     Existing - planned        2007
                                                             2008      2009       2010      2011      2012
     MED-Sector for
      Industry and          existing               3          3           3         3         4         4
    Entrepreneurship
    Central Register        existing              15          15          20       20        20         20

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                                       Government of Montenegro



3.6.1.5. Financial requirements

                          2008          2009               2010                 2011                2012
       Budget            50,000        50,000             50,000               50,000              50,000
   Foreign support



3.6.2. ACCOUNTING AND AUDIT

3.6.2.1 Status
Following the adoption of the first Montenegrin Law on Accounting and Audit in February 2002,
another law was adopted and has been in implementation since 2005. It is partially compliant with the
EU law. It is planned to fully harmonize the legal framework and implementation with the EU system
until 2012.
Legislative framework
The Law on Accounting and Audit (Official Gazette of the Republic of Montenegro, No. 69/05) allows
for the promotion of accounting and audit practices into a clearly defined and transparent procedure of
accountant certification and auditor licencing. The law is partially harmonized with the EU law,
standards, accounting and audit law.
The Law on Accounting and Audit is not compliant with the Fourth and Seventh Directive, or the
Directive on Transparency in drafting management reports, semi-annual reports for listed companies
(Transparency Directive), electronic publication of financial reports (First Directive), approval and
registration of audit companies (Eighth Directive) and the preparation of consolidated accounts
(Seventh Directive).
Institutional framework
The Ministry of Finance is responsible for accounting and audit. A department for accounting and audit
has been set up in the Ministry of Finance as part of the Sector for economy, finance, international
cooperation and lottery games. Two staff work on these issues, with the assistance of the deputy
minister for aconomy, finance, international cooperation and lottery games. Junior assistants are also
sometimes recruited for financial report control matters.
In accordance with the Law on Public Administration and with a view to efficient and economical
performance of its duties, the Ministry of Finance, under the Decree on delegating competences of the
public administration body in charge of accounting and audit, has delegated some of its powers onto
the Institute of Certified Accountants of Montenegro, as the leading party to the Consortsium
Agreement.
The Institute of Certified Auditors of Montenegro has been entrusted with the following responsibilities:
adoption, translation and publication of International Accounting Standards (IAC), International
Financial Reporting Standards (IFRS), and International Audit Standards (IAS) proclaimed by IASB, in
accordance with the Law on Accounting and Audit, as well as the adoption, translation and publication
of new standards or amendments; preparation and issuance of instructions and clarifications to legal
entities registered for economic and social activities and parts of foreign entities; designing of model
financial reports for legal entities and their publication in the Official Gazette of Montenegro; defining
the certification programme in accordance with IFAC training standards; organizing examination for
the titles of certified account and issuance of certificates for certified accountants; evaluation of
eligibility for the acquisition of the title of certified accountant and issuance of certificate; monitoring the
implementation of quality programme for the purpose of assessing the results in accounting and audit
and the training of accountants and auditors in accordance with current IFAC International Education
Standards; keeping record of associations of auditors, certified accountants, and assessment of
eligibility requirements for the operation of audit associations; control of audit.


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                                  National Program for Integration


The Ministry of Finance, as the body responsible for accounting and audit affairs, has set up the
National Council for Accounting and Audit. Members of the National Council, in addition to the
representatives of the Ministry of Finace, are representatives of the Ministry for Economic
Development, Commercial Court, Central Bank, Securities Commission, and Agency for Insurance
Supervision. The National Council for Accounting and Audit has the duty to provide advice to policy
designers, regulators and other stakeholders, as well as to create the right setting in which to promote
accounting and audit legislation and practice in Montenegro. The Council is given the task to prepare
the Country Action Plan (CAP) so as to improve the quality of financial reporting in Montenegro.



3.6.2.2. Short-term priorities
Legislation
Amendments to the Law on Accounting and Audit will be adopted by late 2008 (III quarter) with the
aim to improve and harmonize the financial reporting framework with acquis communitaire,
international standards, and the best practices. The Country Strategy and Action Plan (CAP), with the
goal to improve the quality of financial reporting, will be adopted by the end of 2008 (III quarter).
Short-term priorities until late 2009, following the recommendations from the Report on the
Observance of Standards and Codes (ROSC) that the Ministry of Finance has prepared in cooperation
with the World Bank, include the following:
    - Translation and adoption of the International Financial Reporting Standards (IFRS) – Institute
        of Certified Accountants of Montenegro
    - Translation and adoption of the International Audit Standards (IAS) and Ethics Code – Institute
        of Certified Accountants of Montenegro
    - Enhancing the implementation of financial reporting of the Securities Commission bly the listed
        companies – Securities Commission
    - Setting up of sustainable institutional solutions to continual adoption and publication of IFRS,
        IAS and Ethics Code – Institute of Certified Accountants of Montenegro
    - Setting up the control of financial reporting of insurance companies, investment and pension
        funds – Agency for Insurance Supervision
    - Instroduction of the system of external control of confidence in auditors and audit firms –
        Institute of Certified Accountants of Montenegro
    - Increase the number of auditors – Ministry of Finance
    - Development of a generally accepted training programme for the title of a certified accountant
        – Institute of Certified Accountants of Montenegro
    - Development of a modern accounting curriculum for the University of Montenegro; update
        outdated accounting textbooks – University of Montenegro.
Institutions
The Ministry of Finance, as the line ministry, will set up in the I quarter of 2008 the working group to
assess the fulfillment of tasks and obligations delegated to the Institute of Certified Accountants of
Montenegro, as the leading party to the Consortium. In addition to regular monitoring, the working
group will also analyse the exercise of rights and obligations delegated under the Decree. It will be
composed of Ministry of Finance officers, and will sometimes also hire external assistants. The group
will have meetings from time to time, not later than within three months following the submission to the
Consortium of its report about its activities.

3.6.2.3. Mid-term priorities
Mid-term priorities as defined in the recommendations from the Report on the Observance of
Standards and Codes (ROSC) until 2010 include the following:
   - Harmonization of the financial reporting framework with acqui for the main issues as identified
       in ROSC, including the drafting of consolidated financial reports, regulations of audit firms and
       publication of electronic financial reports.

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                                           Government of Montenegro


    -    Defining proportional requiements for financial reporting of small and medium size companies.
    -    Improving the publication of financial reports.
    -    Reviewing the financial reporting of limited liability companies, small and medium size
         companies.
    -    Issuance of warnings about horizontal accounting issues such as assessment and depreciation
         of property value, dislosing transactions with connected persons and pension accounting –
         Institute of Certified Accountants of Montenegro
    -    Introduction of public supervision over auditors and audit firms.
    -    Increase of the number of auditors.
    -    Development of practical training for accountants and auditors and a system of continual
         professional development for auditors supervised in a proper manner – Institute of Certified
         Accountants.
Legislation
Adoption of the new Law on Accounting and Audit is planned until 2012. It will be in full compliance
with Acquis Communitaire of the EU and international standards.

3.6.2.4. Employment plan
           Institution                 Existing -       2007                 Planned number of employees
                                       planned                     2008        2009     2010      2011           2012

MF – Dept. for Accounting and
                                       Existing           2          3           3             3        3            3
            Audit




3.6.2.5. Financial requirements
                           2008             2009                 2010                  2011                  2012
        Budget            45,000           43,500               43,500                50,000                50,000
Note: The funding for the National Council and Working Group has been enivisaged under their budgets.




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                                   National Program for Integration



3.7. INTELLECTUAL PROPERTY RIGHT
It is a priority of Montenegro to incorporate intellectual property into its legal system through both
legislative provisions and institutional framework, as recommended by the Stabilization and
Association Agreement and European Partnership. This calls for greater investment into creative work
and innovations and the strengthening of internal market and setting in Montenegro that will be
stimulative for intellectual property.
Stabilization and Association Agreement with the EU, Chapter VI, Article 75 – Intellectual, Industrial
and Commercial Property1 prescribes that Montenegro will undertake necessary measures so as to
guarantee a protection level of intellectual, industrial and commercial property similar to the protection
which exists in the Community, including efficient means for the enforcement of those rights, at the
latest five years after the entry into force of this Agreement.
Declaration of the Government of Montenegro of December 4th, 2006, making Montenegro a WIPO
member by an act of notification, announced continuity and accepting of obligations and compliance
with all treaties pertaining to the field of intellectual property.
International conventions and agreements which generally refer to intellectual property rights are the
Convention Establishing the World Intellectual Property Organisation (1967 WIPO Convention,
including 1979 amendments) and the Agreement on Trade Related Aspects of Intellectual Property
Rights (WTO – TRIPS Agreement) which is currently being negotiated.

3.7.1. COPYRIGHT AND RELATED RIGHTS

3.7.1.1. Status
Legislative framework
Copyright issues are regulated by the Law on Copyright and Related Rights (Official Gazette of S&M,
No. 61/04) which is applied as a national regulation under the Decision on the Independency of the
Republic of Montenegro (Official Gazette of the Republic of Montenegro, No. 36/06) and the Decree
on Providing the Application of Intellectual Property Rights (Official Gazette of the Republic of
Montenegro, No. 61/07). The Law regulates the rights of authors of literary, scientific, professional and
artistic works, copyright related rights (the right of the first publisher of a free work, right of
phonograms, videograms, shows and databases producers, manner for exercising copyright and
related rights and judicial protection of those rights).
The Law is in compliance with the following international regulations:
Convention Establishing the World Intellectual Property Organisation (1967 WIPO Convention,
including 1979 amendments thereto);
Agreement on Trade Related Aspects of Intellectual Property Rights (WTO Agreement TRIPS);
International conventions and agreements concerning copyright and related rights (1886 Berne
Convention for the Protection of Literary and Artistic Works, 1971 Paris Act), International Convention
for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (1961
Rome Convention), Convention for the Protection of Producers of Phonograms against Unauthorized
Duplications of Their Phonograms (Geneva 1971 Phonograms Convention), Convention Relating to
the Distribution of Programme–Carrying Signals Transmitted by Satellite (Brussels Satellites
Convention 1974), WIPO Copyright Treaty (Geneva 1996), WIPO Performances and Phonograms
Treaty (Geneva 1996).
European Union Directives (Directive on the Legal Protection of Computer Programs 3191L0250;
Directive on Rental Right and Lending Right and on Certain Rights Related to Copyright in the Field of
Intellectual Property 31992L0100; Directive Harmonizing the Term of Copyright Protection
31993L0098; Directive on the Legal Protection of Databases 31996L0009; Directive on the
Coordination of Certain Rules Concerning Copyright and Rights Related to Copyright Applicable to
Satellite Broadcasting and Cable Re-Transmission 31993L0083; Directive on the Harmonization of

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                                     Government of Montenegro


Certain Aspects of Copyright and Related Rights in the Information Society 32001L0029; Directive on
the Resale Right for the Benefit of the Author of an Original Work of Art 32001L0084).
The Law on Optical Disks (Official Gazette of the Republic of Montenegro, No. 2/07) regulates the
production and commercial duplication of optical disks, licencing of production and duplication
activities, as well as import, export and trade in raw materials, equipment and products. It is a lex
specialis, upgrading the Law on Copyright and Related Rights and it is harmonized with the said
conventions and directives.
Institutional framework
In line with the Decree on Public Administration Authorities Organisation and Manner of Work (Official
Gazette of the Republic of Montenegro, No. 60/06) it is the competence of the Ministry of Culture,
Sport and Media to deal with the field of copyright and related rights. The Ministry drafts and proposes
legal regulations and monitors their implementation, drafts and adopts secondary legislation, exercises
cooperation with WIPO (World Intellectual Property Organisation) with headquarters in Geneva, which
administrates 24 conventions from the field of intellectual property as a specialized UN organisation. It
conducts trainings by organizing seminars independently and in cooperation with other EU authorities
with the purpose to strengthen the preventive protection systems, as well as public campaigns aimed
at informing the public and raising the public awareness on the importance of complying with
intellectual property rights. The Ministry of Culture, Sport and Media closely cooperates with the
Ministry for Economic Development, which is competent for the industrial property field, in exercising
its competences from the field of copyright and related rights, as well as with the Intellectual Property
Office - Montenegro.

3.7.1.2. Short-term priorities
Legislation
In the IV quarter of 2008, the Montenegrin Law on Copyright and Related Rights will be adopted,
adapted to institutional needs of Montenegro and new EU regulations. It will solve practical issues of
procedures for the protection of those rights in line with real Montenegrin possibilities and needs.
National Strategy of Intellectual Property, covering a 5 year period, will be adopted in the IV quarter of
2009, after the adoption of the Law on Copyright and Related Rights.
Other priorities include:

−   Preparation of an Action Plan for the Development of International Cooperation in the Area of
    Intellectual Property with the relevant international organisations and representation of
    Montenegrin interests in them, especially emphasizing WIPO. To be done in cooperation with the
    Ministry for Economic Development and Intellectual Property Office – IV quarter of 2008.
−   Strengthening cooperation with the police, prosecutor`s office, customs and the judiciary.
−   Publishing brochures (WIPO, EU and IFPI) for the purpose of educating the public, done
    continuously during 2008 and 2009.

3.7.1.3. Med-term priorities
The objective by 2012 is for Montenegro to have a complete legislative framework from the field of
intellectual property, harmonized with EU acquis and all international standards, as well as to reach an
efficient implementation of regulations from this field.
Mid-term priorities include:
− Strengthening and training of administrative capacities within the Ministry of Culture, Sport and
   Media (current state: 1 incumbent – job title: independent adviser for copyright and related rights)
− Raising the level of civil servants’ information on copyright and related rights and their significance
   for the overall cultural and economic development through the cooperation with the competent
   ministries and the Human Resources Management Authority (seminars and workshops)
− Internet presentation of copyright and related rights
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                                   National Program for Integration



−   Introducing education on copyright and related rights within the school system
−   Promotion of intellectual property culture
−   Developing an efficient protection system
−   Increasing the efficiency of management and cooperation by interacting with other public
    authorities and on the international plane as well.



3.7.2. INDUSTRIAL PROPERTY RIGHT

3.7.2.1. Status
Legislative framework
The legal framework enabling the industrial property right encompasses a number of laws and by-
laws.

    Law on Patents (Official Gazette of S&M, No. 35/04) regulates the legal protection of inventions,
    that is, patents, which is a right acknowledged for inventions from any technical field, which are
    new, have an innovation level and are industrially applicable. The subject of an invention protected
    by a patent may be a product or a procedure. The Law is harmonized to a large extent with the
    Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which is one of the
    basic preconditions for accessing World Trade Organisation (WTO). It is also harmonized with the
    Convention on European Patent (revised in 2000); Directive 31998L0044 on Legal Protection of
    Innovations from the Field of Biotechnology; Agreement for Cooperation in the Field of Patents
    (Patent Cooperation Treaty), ratified by S&M in 1996; Paris Convention on the Protection of
    Industrial Property (Stocholm Act of 1967, amended in 1979) and the Patent Law Treaty, of 2000.
    Decree on the Procedure for Legal Protection of Inventions (Official Gazette of S&M, No. 62/04).
    The Law on Trade Marks (Official Gazette of S&M, No. 07/05) regulates the manner of acquiring
    and the protection of the right to trade mark in the turnover of goods, that is, services. A trade mark
    is a right protecting a sign which is used in trade for differentiating goods, that is, a service of a
    natural or legal person from the same or similar goods or services of a natural or legal person. This
    law was harmonized with the Directive 31989L0104 to Approximate the Laws of the Member
    States Relating to Trade Marks; Agreement on Trade Related Aspects of Intellectual Property
    Rights (TRIPS); Trademark Law Treaty (Geneva, 1994); Madrid Agreement concerning
    International Registration of Trade Marks (the Stockholm Act, 1967, amended in 1979); Protocol to
    Madrid Agreement concerning International Registration of Trade Marks (Madrid Protocol, 1969)
    and Nice Agreement Concerning the International Classification of Goods and Services for the
    Purposes of the Registration of Marks (Geneva, 1977, amended in 1979).
    Decree on the Procedure for Recognizing Trade Marks (Official Gazette of S&M, No. 28/05).
    Law on the Legal Protection of Design (Official Gazette of S&M, No. 61/04) regulates the manner
    of exercising and protecting rights to the outside appearance of a product. Outside appearance of
    a product implies the overall visual impression a product leaves on the informed consumer or user.
    The Law is harmonized with the 1998 Directive on the Legal Protection of Designs and with the
    Hague Treaty on International Depositing of Industrial Design (London Act, 1934 and Hague Act,
    1960).
    Decree on the Procedure for Recognizing the Right to Design (Official Gazette of S&M, No. 28/05).
    Law on Topographies of Integrated Circuits (Official Gazette of S&M, No. 61/04) regulates the
    subject and terms of protecting integrated circuits topographies, rights of authors and the manner
    for their realization, as well as the rights of a company or another legal entity where the topography
    was created. The Law was harmonized with the 1986 Directive on the Legal Protection of
    Topographies of Semi-Conductor Products and the Agreement on Trade Related Aspects of
    Intellectual Property Rights (TRIPS).
    The Law on Indications of Geographic Origin (Official Gazette of S&M, No. 20/06) regulates the
    manner of obtaining and legal protection of indications of geographic origin. Geographic origin

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                                      Government of Montenegro


   indications are names of origin and geographic indications. Geographic origin indications are used
   for marking natural, agricultural and industrial products, home-made products and services. The
   Law is harmonized to a large extent with the Treaty on Trade Related Aspects of Intellectual
   Property Rights (TRIPS), the Madrid Agreement for the Repression of False or Deceptive
   Indications of Source on Goods and the Lisbon Agreement for the Protection of Appellations of
   Origin and Their International Registration.
   Decree on Keeping Records for Works of Authorship and Subject Matter of Related Rights (Official
   Gazette of S&M, No. 24/05).
Previos regulations adopted on the level of state union S&M and in Montenegro are valid until the
adoption of national ones. Regulations adopted in the meanwhile by Montenegro are as follows:

   The Law on Optical Disks (Official Gazette of the Republic of Montenegro, No. 02/07), regulating
   the production, commercial duplication, trade and export of optical disks and export and import of
   natural parts, raw materials and equipment used for the production of optical disks. The law was
   developed in cooperation with the Ministry of Culture, Sport and Media, along with USAID
   technical assistance.
   The Law on Application of Regulations on the Intellectual Property Protection (Official Gazette of
   the Republic of Montenegro, No. 45/05). This Law regulates the authorities competent for the
   implementation of regulations in the field of intellectual property, procedure for undertaking
   measures by competent authorities when there is suspicion that the production, purchase, sale,
   that is, circulation, issuing and using certain goods, will cause the infringement of intellectual
   property rights and it defines the level of sentences for commercial offences and misdemeanors.
   The Decree on Securing the Application of Rights from the Intellectual Property Field (Official
   Gazette of the Republic of Montenegro, No. 61/07). Technical assistance of USAID experts was
   used.
   Decree on Amendments to the Decree on Public Administration Organisation and Manner of Work
   (Official Gazette the Republic of Montenegro, No. 25/07); Art. 1, 2, 3, 4 and 5. This Decree
   entered into force on May 19th, 2007 and it prescribes the establishemnt of the Intellectual
   Property Office, its affairs and the beginning of its work.
   Criminal Code (Official Gazette of the Republic of Montenegro, No. 47/06). Chapter XXI – Criminal
   Offences against Intellectual Property, Articles 232-238.
   Law on the Protection of Undisclosed Information (Official Gazette of Montenegro 16/07),
   harmonized with TRIPS (Art. 39).
Institutional Framework
The Ministry competent for industrial property is the Ministry for Economic Development (MED),
Department for Internal Trade and Competitiion, headed by Assistant Minister, and within the
Department, a Division for Internal Trade and Industrial Property was established (two employees).
Within its competence, MED is preparing and proposing legal regulations and bylaws, monitoring their
implementation and exercising cooperation with WIPO (World Intellectual Property Organisation), with
headquarters in Geneva.
Intellectual Property Office, whose establishemnt is on-going, according to the Decree on Public
Administration Organisation and Manner of Work (Official Gazette of the Republic of Montenegro, No.
25/07), is competent for securing the application of law from the field of intellectul property registered
in the Office, rights from applications submitted to the Office, rights in relation to works subject to
protection of copyright and related rights, intellectual property rights registered through international
registrations, as well as rights from international applications. The organisational structure of the Office
comprises of the Department for Industrial Property and the Department for Information Services and
Registers, as well as the Division for Copyright and Related Rights and Service for General Affairs and
Finances. The envisaged number of employees amounts to 22 (18 missing). There were no trainings
so far.



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                                   National Program for Integration



3.7.2.2. Short-term priorities
The New Law on Patents will prescribe the legal protection of innovations, that is, patents, as a right
recognized for innovation from any technical area, which are new, have an innovation level and are
applicable in industry. The subject of an invention protected by a patent may be a product or a
procedure. This law will incorporate provisions of the Treaty on Trade Related Aspects of Intellecual
Property Rights (TRIPS) and the conventions and directives of European Union regulating this field.
The Law will be adopted in the second quarter of 2008.
New Law on Indications of Geographic Origin will regulate the manner of obtaining and the rights of
protecting indications of geographic origin. Geographic origin indications are names of origin and
geographic indications. Geographic origin indications are used for marking natural, agricultural and
industrial products, home-made products and services. This Law will be harmonized with the Treaty
on Trade Related Aspects of Intellectual Property Rights (TRIPS), the Madrid Agreement for the
Repression of False or Deceptive Indications of Source on Goods and the Lisbon Agreement for the
Protection of Appellations of Origin and Their International Registration. The Law will be adopted in
the second quarter of 2008.
By the end of 2009, Montenegrin laws on intellectual property will be adopted (Law on Legal
Protection of Design, Law on Trade Marks, Law on the Protection of Topographies of Integrated
Circuits), along with previous (simultaneous) training of relevant personnel, with the purpose of further
strengthening of industrial property rights.

The following is also planned in this period:
   Adoption of National Strategy of Intellectual Property.
   Providing for the operation of Intellectual Property Office.
   Cooperation with relevant authorities in charge for implementation of laws referring to industrial
   property, together with the border services, law enforcement authorities and the judiciary (customs
   services).
   Formal confirmation of participation in main international agreements in the area of intellectual
   property rights.
   Exercising cooperation with relevant international organisations in the field of intellectual property,
   aimed at strengthening the interests of Montenegro in them, with special emphasis on WIPO
   (possibly, the development of an Action Plan for the Development of International Cooperation in
   this field).
   Entering into the Cooperation and Extension Agreement with the European Patent Office (EPO).
The capacities of the Ministry for Economic Development (MED) will be strengthened that is, the
capacities of the Division for Industrial Property and Competitition as well as those of the Institute for
Intellectual Property, through adequate personnel trainings.
It is planned to provide a protection level in Montenegro similar to the protection in EU by the end of
2009.

3.7.2.3. Mid-term priorities
   Strenghtehing the capacities of the Ministry and of the Intellectual Property Office aimed at
   providing a quality level of intellectual property protection similar to the protection which exists in
   EU, in line with the Stabilization and Association Agreement (Chapter VI, Article 75).
   Accesing multilateral conventions on industrial property rights, stated in Annex VII, Article 75 of the
   Stabilization and Association Agreement.
Legislation
Implementation of Montengrin laws on industrial property, which will enable an adequate protection
level of industrial property rights, in line with obligations from SAA, as well as efficient operation of
Intellectual Property Office.


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Institutions
Intellectual Property Office will undertake the obligations of protection of industrial property rights
based on relevant laws, bylaws and procedures for the protection of industrial property rights.
Simulteneously, training will be provided in the field of implementing intellectual property rights for its
employees, customs officials and judges in competent courts, as well as educating the public,
including representatives of economy and consumers.

3.7.2.4. Employment plan
Within the Ministry for Economic Development (MED), Department for Internal Trade and Competition,
Division for Internal Trade and Industrial Property has three employees (2 advisers for industrial
property and 1 coordinator). Intellectual Property Office - Montenegro currently has 9 employees, but
the job organization act envisages 22 employees. So, it is envisaged for the other 13 employees to
start working during 2008.


                                                                                 Planned number of employees
        Institution        Existing –planned             2007
                                                                      2008.        2009.        2010.      2011.       2012.
   MED-Sector for
 Internal Trade and              Existing                 3              3           3              3         3             3
    Comptetition
Intellectual Property
                                 Existing                 9             22           22             22       22            22
        Office

3.7.2.5. Financial requirements

                              2008.             2009.              2010.                   2011.                   2012.
   Budget- MED                53.000           58.500             70.000                   77.000                 85.000
    Intellectual
 Property Office –           324.000           660.000            726.000                 798.000                 878.000
      Budget

  Foreign support            155.000/           WIPO
 (additional funds)         IPA 2008             EPO
Note:
*The 2008 Budget of Montenegro approves funds for the work of Intellectual Property Office in the amount of €324.128,99 for
maintaining operating costs for 12 of the 22 staff envisaged by its systematization of work posts. The employment of full staff
requires additional funds amounting to €130.000, while an additional sum of €15.000 is required for the design of software
and €10.000 for the training of its employees. Together with the already allocated budget for the current year, it amounts to
€479.000.

3.7.3. ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS

3.7.3.1. Status
Legislative framework
Law on Implementing Regulations Laying Down the Protection of Intellectual Property Rights (Official
Gazette of the Republic of Montenegro, No. 45/05) regulates authorities competent for the
implementation of regulations in the field of intellectual property, procedure for undertaking measures
by competent authorities when there is suspicion that the production, purchase, sale, that is,
circulation, issuing and using of certain goods will result in infringement of intellectual property rights
and it defines the level of sentences for commercial offences and misdemeanors.
Protection of intellectual property rights is conducted through the following regulations as well:

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   Criminal Code (Official Gazette of the Republic of Montenegro, No. 47/06); Chapter XXI – Criminal
   Offences against Intellectual Property, Articles 232-238.
   Decree on Customs Authorities` Treatment of Goods Reasonably Suspected of Infringing
   Intellectual Property Rights (Official Gazette of the Republic of Montenegro 25/05).
   The Decree on Securing the Application of Rights from the Intellectual Property Field (Official
   Gazette of the Republic of Montenegro, No. 61/07).
   The Law on the Protection of Undisclosed Information (Official Gazette of Montenegro 16/07),
   harmonized with TRIPS (Article 39).
   Decree on Amendments to the Decree on Public Administration Organisation and Manner of Work
   (Official Gazette the Republic of Montenegro, No. 25/07); Art. 1, 2, 3, 4 and 5. This Decree
   entered into force on May 19th, 2007. It prescribes the establishment of the Intellectual Property
   Office, its affairs and the beginning of its work.
Institutional framework
Ministry competent for industrial property is the Ministry for Economic Development (MED),
Department for Internal Trade and Competition, headed by Assistant Minister, and within the
Department, a Division for Internal Trade and Industrial Property was established (two employees).
Within its competence, MED prepares and proposes legal regulations and monitors their
implementation; prepares and adopts by-laws; execises cooperation with WIPO (World Intellectual
Property Organisation), with headquarters in Geneva.
The Ministry of Culture, Sport and Media is competent for the area of copyright and related rights. The
Ministry drafts and proposes legal regulations and monitors their implementation, drafts and adopts
bylaws and exercises cooperation with WIPO (World Intellectual Property Organisation).
Intellectual Property Office, whose establishemnt is on-going, according to the Decree on Public
Administration Organisation and Manner of Work (Official Gazette of the Republic of Montenegro, No.
25/07), is competent for securing the application of law from the field of intellectul property registered
in the Office, rights from applications submitted to the Office, rights in relation to works subject to
protection of copyright and related rights, intellectual property rights registered by international
registrations, as well as rights from international applications. The organisational structure of the Office
comprises of the Department for Industrial Property and the Department for Information Services and
Registers, as well as the Division for Copyright and Related Rights and Service for General Affairs and
Finances. The envisaged number of employees is 22 (18 missing).
Implementation of intellectual property rights is the competence of Market Inspection as a Division
within the Ministry for Economic Developement. It conducts supervision on the commodities market,
services in the turnover of goods and crafts industry and other personal services which are not given
over to another inspection authority's supervision on basis of special regulations.
The Market Inspection of Montenegro is organized in four working units, out of which three are based
on the territorial principle (field units). There are 63 employees out of which 57 inspectors working on
the immediate supervision of market affairs, whereas 4 inspectors are simultaneously coordinating
working units. All inspectors have college degrees (27 qualified lawyers, 21 qualified economists, 10
qualified agronomy, technology and forestry engineers. Independent adviser (1 qualified economist), 1
trainee – qualified lawyer and 3 employees with high school degree. The Market Inspection is headed
by the principal market inspector. Funds were allocated for covering the MI operating costs from the
state budget.
The market inspection still lacks appropriate information system, which reduces the possibility to track
data which would assist in making a better risk appraisal for the needs of a more efficent market
supervision.
Until now, MI representatives, and in some cases all market inspectors, have attended several
seminars and round tables on the topic of protecting intellectual property rights (CARDS, PLAC,
TAIEX, USAID and APK - Committee for the Protection of Intellectual Property etc.). MI is included
into the training conducted by the Human Resources Management Authority. A visit to the Slovenian

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                                      Government of Montenegro


market inspection was organized for the purpose of getting introduced to the organization of
inspection, its manner of work and its cooperation with other public authorities and institutions.
Apart from the Market Inspection, Customs Administration deals with the enforcement of intellectual
property rights. One of its basic tasks is the supervision of entering, exiting and transiting goods for
which there are special protection of intellectual rights measures prescribed. The customs authority, in
line with the Customs Law of Montenegro, will not approve the requested customs procedure for
goods, if there is suspicion that they violate intellectual property rights.
Based on Customs Law, two years ago, a regulation was adopted laying down the protection of
intellectual property rights by a customs authority. Namely, the Government of Montenegro adopted a
Decree on Customs Authorities` Treatment of Goods Reasonably Suspected of Infringing Intellectual
Property Rights (Official Gazette of the Republic of Montenegro, No. 25/05) in April 2005. The
solutions contained in the Decree are harmonized with the basic principles from the Treaty on Trade
Related Aspects of Intellectual Property Rights (TRIPS) and it prescribes the conditions for the
application of measures for the commodities subject to customs procedure which are reasonably
suspected of infringing intellectual property rights, as well as the manner for implementing those
measures. In line with the Decree, the customs authority may, at the request of the holder of rights or
by virtue of office, terminate the customs procedure and retain the goods in case of suspicion that its
import, export or transit will infringe intellectual property rights.
Since the counterfeiting of goods nowadays represents a serious problem causing great damage to
state budgets and holders of intellectual property rights, and since the World Customs Organisation
marked the year 2007 as the year for combating counterfeiting and piracy, the customs service of
Montenegro is implementing measures under its competences and it is endeavouring to make its
activities in this field more efficient, so as to combat the turnover of counterfited goods. To that regard,
the Customs Administration dedicates special attention to the trainings of customs officials dealing
with the protection of intellectual property rights.
Since the beginning of application of the Decree and until the end of 2007, the Customs Administration
was submitted about 50 requests for the protection of intellectual property rights used by holders of
rights to request the customs authority to terminate the customs procedure and retain goods in case of
suspicion that entering, exiting or transit of goods violates the intellectual property rights. Increased
interest of holders of rights in the protection of intellectual property by the customs authority and
increase of the number of submitted requests is noticeable. A number of procedures for establishing
the violations of intellectual property rights for the goods retained at the request of the holder of right
and by virtue of office is currently on-going.
During 2007, customs officials have been repeatedly terminating the customs procedure at the
requests of holders of rights and they have retained goods under suspicion that they were
counterfeited. They were mostly combined consignments of various holders of right. Also, during
2007, customs employees have been repeatedly terminating the customs procedure by virtue of office
and they have retained goods under suspicion that they were counterfeited.
In October 2007, Customs Administration signed a Letter of Intent for accepting SECURE standards
which represent the standards for a uniform exercising and more efficient protection of intellectual
property rights by customs authorities. SECURE standards, adopted by the World Customs
Organisation, contain non-binding measures for WCO members, holders of rights and others and refer
to regulations for the protection of intellectual property rights and their application, risk analysis and
exchange of intelligence, as well as capacities building and international cooperation.
The Administration has prepared a Guide for Customs Officials on the Identification of Pirate
CDs/DVDs, published by IFPI. The Guide was delivered to Administration’s organisational units and it
is avaliable on the notice-board of the Customs Information System. The publishing of the Guide and
publications containing examples and guidelines for recognizing counterfeited products is planned and
they would be used by customs officials.
Installing a database for intellectual property is planned as well. The database will be developed
based on model used within the Great Britain customs service and it will be adapted to the needs of

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this Administration. The database is intended for the Division dealing in intellectual property and it
represents record keeping of cases and applications for the protection of intellectual property rights. It
consists of four parts: cases, applications, CEN form and reports, and some parts will be available to
customs officials from customs offices and customs posts. Improvement of cooperation with the
holders of rights is also planned. The success of enforcement of measures by the customs authority in
the field of intellectual rights protection depends on their interest and cooperativeness level.

3.7.3.2. Short-term and mid-term priorities
   Strengthening the cooperation among the relevant authorities in charge of enforcing laws referring
   to intellectual property – border services, law enforcement authorities and the judiciary.
   Strengthening cooperation with relevant international organisations in the field of intellectual
   property, aimed at strengthening the interests of Montenegro in them, with special emphasis on
   WIPO.
   Continuous training for all employees included in the process of enforcing intellectual property
   rights.




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                                     Government of Montenegro



3.8. COMPETITION POLICY


Montenegro has undertaken to ensure, according to the provisions of Article 73 of the Stabilization
and Association Agreement (SAA), competition rules application standards, issuing from Articles 81,
82 and 86 of the Treaty establishing the European Community, implying the creation of a transparent
legislative framework, the establishment of an operationally independent institution and efficient
implementation.
In accordance with the European Partnership recommendations, Montenegro will establish a
functionally independent competition protection body and ensure adequate means for its operation; it
will also strengthen the state aid framework and enhance transparency aimed at efficient state aid
control in harmony with the SAA requirements. With a view to achieving these goals, an Action Plan
has been adopted with priorities set.

3.8.1. COMPETITION POLICY
3.8.1.1. Status
Legislative framework
The Competition Protection Law (Off. Gazette of RoM no. 69/05), which came into effect on 1 January
2006, is the first Montenegrin law in this area, regulating the basic competition rules and institutional
framework for their application. The Law is harmonized with the EC law, competition rules standards
defined in Articles 81, 82 and 86 of the Treaty establishing the European Community, as well as key
EU provisions and communications related to this area. The Law was amended in May 2007 (Off.
Gazette of RoM no. 37/07). The Law on Changes and Amendments to the Competition Protection Law
has enabled the establishment of an operationally independent body for competition protection –
Directorate for Competition Protection.
The major bylaws adopted on the basis of this Law during 2006 and 2007 are as follows:

   Order on precise requirements for exemptions by types and definition of types of agreements
   which may be exempt from law (Off. Gazette of RoM no.10/07). The Order is also harmonized with
   the key provisions applying in the European legal order;
   Book of Rules on the content of requests for individual exemptions (Off. Gazette of RoM no.36/06),
   Book of Rules on the content of agreement registration and record keeping (Off. Gazette of RoM
   no. 54/06),
   Book of Rules on the form and content of the application for the registration of the approved
   concentrations, the form and keeping of the register (Off. Gazette of RoM no.36/06),
   Book of Rules on the form and content of the request for procedure initiation (Off. Gazette of RoM
   no.36/06),
   Instruction on the form and content of the request for the issuance of concentration approval (Off.
   Gazette of RoM no.77/05),
   Instruction on the criteria for relevant market identification (Off. Gazette of RoM no.77/05).


Institutional framework
The institution in charge of competition policy is the Ministry of Economic Development. Within the
Ministry's Sector for Internal Trade and Competition, a Competition Protection Department has been
established. The total of six employees is engaged in this field, together with the deputy minister for
internal trade and competition. The Competition Protection Department performs the following tasks:
monitors competition on the market in general and on the markets of certain economic sectors;
approves exemptions from the ban on certain agreements and approves concentrations of participants
under the stipulated terms and decides on other issues within its competence under this Law; decides

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                                  National Program for Integration


on the breach of competition rules stipulated by this Law; takes measures against the participants and
associations of participants for the violations of competition rules or for the sake of their prevention,
cessation of an already committed violation and removal of damaging effects on the participants and
consumers; analyzes the state on the market in terms of free and efficient competition and reports to
the Ministry on the findings; prepares expert bases for the development of bylaws, application of
European and other international standards and instruments in the area of competition protection;
establishes international cooperation with authorized bodies from other countries and international
organizations; publicises requests for concentration approval in the Official Gazette of Montenegro
(name, the nature of concentration and the economic sector within which concentration is performed),
and performs other tasks in accordance with the Law.
Since its coming into effect, the operative application of the Competition Protection Law has referred
primarily to concentration control (17 concentration approvals on 30/11/07), with the largest number
being related to incomplete requests for concentration approval.
Pursuant to the Order on the public administration organization and operation (Off. Gazette of RoM
no.06/07), the Directorate for Competition Protection has been established, which will take over the
tasks related to the protection of competition, defined by the Changes and Amendments to the Law on
the Protection of Competition (Off. Gazette of RoM no.37/07). The establishment of the Directorate for
Competition Protection will be followed by the appointment of the director and the adoption of the
Book of Rules on internal organization and job description in the Directorate for Competition
Protection. As recruitment of new staff has been planned, competition-related tasks within the
Directorate will be performed by eight employees who will undergo intensive training.
In order to create an efficient institutional framework, apart from intensified employment and training,
technical cooperation programmes are run in various forms of technical assistance.
So far, support has been realized through the following projects:
   USAID – provided technical support in the writing of the Draft Law in the period 2004-2005;
   CARDS – (PLAC – Policy and Legal Advice Centre), provided technical support in the
   development of bylaws from 2005 to May 2007. Expert support was provided, seminars in the
   Chamber of Economy organized and education of judges assisted through study visits;
   OECD – provided support in the period 2006-2007 in the education of staff through seminars,
   organized in Hungary, within OECD RCC centre;
   TAIEX – provided support in October 2006 in the education of staff during an official visit to the
   Slovenian Office for Competition Protection.
3.8.1.2. Short-term priorities
Legislation
The strategy of competition policy will be adopted in the second quarter of 2008, defining the current
state in the area of competition, goals, priorities and the way to achieve them, as well as the
necessary resources for efficient implementation of competition rules. The final goal is full
harmonization of competition rules and related legal provisions with the Acquis and efficient
implementation of these rules through the operation of independent competent bodies.
In the first quarter of 2009 a new Competition Protection Law is to be adopted, which will be
harmonized with the regulations EC 32003R0001, 32004R0139, 31965R0019, 31999R1215,
31999R2790 and 32002R1400.
Institutions
The institutional reinforcement plan encompasses:
   Staff reinforcement in the Directorate for Competition Protection in the course of 2008;
   Establishment of a Competition Protection Agency (an operationally independent body) – 2nd
   quarter 2009.




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                                      Government of Montenegro


For the period ahead, technical assistance has been ensured within the 18-month programme “EU
Approximation in Trade and Single Market Policies - TRIM MNE“, and upon the expiry of this
programme, a special IPA competition-related programme is envisaged, too.
The new Competition Protection Law will stipulate the financing method of the Competition Protection
Agency, with special attention paid to work evaluation, particularly to the analysis of resolved cases
(quantitative and time analysis), with the necessary recommendations for improvements aimed at
achieving greater efficiency. Apart from the control of concentrations and non-operative actions for
enhancing competition culture (Competition Advocacy), special attention will be directed to the
creation of conditions for detecting violations of competition rules.
With the setting up of the Competition Protection Agency, the Directorate for Competition Protection
will cease to operate.
3.8.1.3. Mid-term priorities
Legislation
Harmonization of bylaws with the Competition Protection Law to be adopted in the first quarter of
2009, is planned for the first quarter of 2010. Harmonization will depend upon the analysis of the
necessary number of bylaws in future, so that incomplete or superfluous regulations are avoided. The
analysis will also include needs evaluation (filing requests and issuing decisions) for the distribution of
individual exemptions and the analysis of actions, falling under the category of exemptions, as well as
conditions for submitting requests for concentration approval.
Institutions
The main medium-term priority is strengthening the Competition Protection Agency, particularly in
terms of ensuring quality sources of financing, improving technical working conditions, staff
recruitment and training. Specialized training will be aimed at becoming acquainted with and
performing investigative actions, employing economic analyses and making the right decisions in
proceedings.
Special attention will be devoted to the detection of violations of competition rules, particularly tacit
agreements and abuse of dominant position, for which conditions will be created through the
introduction of the “Leniency Programme” (determining the violations of competition rights – within the
EC competence), whereas in the area of “Competition Advocacy” (raising the level of competition
culture – seminars, trainings, round tables), the focus will be on judicial training and training of staff
employed in sector regulatory authorities.
3.8.1.4. Employment plan
The Directorate will commence work with 8 employees, while additional recruitment will gradually rise
in years, with intensive training provided. As for the planned number of staff in 2008, it is necessary to
bear in mind the technical cooperation within the EU-financed TRIM project.


                                   Existing -                       Planned number of employees
          Institution                             2007
                                   planned                 2008       2009       2010      2011     2012
    Ministry of Economic
  Development – Sector for
                                   Existing         5        2          2          2        2         2
    Internal Market and
        Competition
   Competition Directorate         Planned          -        8          -          -         -        -
   Competition Agency              Planned          -        -         11         14        17        20


3.8.1.5 Table of financial requirements


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                           2008            2009             2010               2011              2012
     Budget             184,700.00       238,100.00      248,400.00          303,250.00       353,120.00
 Foreign support        400,000.00       500,000.00

3.8.2. STATE AID
3.8.2.1. Status
Legislative framework
The Law on State Aid Control (Off. Gazette of RoM no. 26/07) is the first Montenegrin law in this area
which specifies and regulates the general conditions and rules for the preparation, granting, control of
granting and use, approval and return of state aid, for the sake of applying market economy principles,
maintaining competition and fulfilling obligations undertaken on the international level. The Law is
harmonized with EU law in great part (the European Commission gave a positive opinion), as well as
with the standards of state aid law defined by Articles 81, 82, 86 and 87 of the Treaty establishing the
European Community.
Institutional framework
The institution in charge of state aid control is the Ministry of Finance.
Pursuant to Article 6 of the Law on State Aid Control, by the Decision of the Government of
Montenegro of 8 November 2007 on the setting up of the Commission for State Aid Control, a 7-
member Commission was formed, in charge of controlling the process of granting, using, approving,
monitoring and returning state aid.
The Commission is comprised of the chairperson, nominated by the public administration body in
charge of financial affairs, and six members nominated by the Ministry of Finance, public
administration bodies in charge of economic development, European integration and agriculture and
the Union of Municipalities, as well as a representative of the Union of Employers. The chairperson of
the Commission and its members are elected for a four-year period, with the possibility of re-election.
In April 2005, a monitoring team of the Ministry of Finance was set up responsible for the state aid
monitoring and control with the task of reporting on the state aids realized; in June 2006, two members
of the team participated in a three-day seminar in Brussels within the TAIEX programme. The
European Union (Parim) ensured expert assistance for the creation of the law and bylaws in the area
of state aid.
3.8.2.2. Short-term priorities
The major bylaws to be adopted in the first quarter of 2008 are:
   Order on specific criteria, purpose and conditions of state aid granting;
   Order on the procedure of submitting and content of the required documentation for the previous
   and future state aid control;
   Book of Rules on the content of the annual report on state aid.
Given that so far the granting of state aid was regulated by individual decisions, these bylaws serve to
regulate: specific criteria, purpose and conditions of state aid granting; the manner and procedure of
submitting a proposal, or notification of individual support and aid; the content of the granting
documentation, previous and future state aid control, as well as the content of the annual report on
state aid. These bylaws are set as the basic principles of state aid control, and the basis for regulating
criteria and other elements necessary for efficient normative state aid regulation, particularly bearing in
mind the SAA between the European Community and its member states and the Republic of
Montenegro, especially Article 73 (iii), and Protocols 4 and 5 of the SAA (Protocol 5 stipulates a ban
on the operative state aid for steel industry, but if the company producing steel is facing difficulties, the
Protocol allows support, with the necessity for the company to develop a restructuring programme);



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                                            Government of Montenegro


The bylaws will be harmonized with EC Regulation 70/2001, Recommendation 2003/361/EC, including
Community Framework 2006/C 323/01 and Commission Communication 2004/C 244/02, as well as
the most important EU Directives in the area of state aid, which refer to financial transfers and
transactions, exemptions, assessment rules for state aid approval to certain sectors, etc.
Implementation of the regulations enables the fulfilment of the obligations from SAA, i.e. the phasing
out of all kinds of state aid which impair or threaten to impair market competition by placing certain
companies or products in a more favourable position. Also, it is stipulated that state aid may be
granted if it represents a stimulus for the realization of a planned project or if it is necessary for its
realization.
At the same time, the department for state aid coordination within the Ministry of Finance, which
performs expert, administrative and technical tasks for the Commission, will be strengthened; in
addition, the transparency of state aid will be enhanced as a prerequisite for efficient state aid control
in accordance with the Stabilization and Association Agreement.
3.8.2.3. Mid-term Priorities
In accordance with the European Partnership recommendations, medium-term priorities in this area
are further reinforcement of the state aid framework, establishment of state aid control in compliance
with the SAA requirements, further harmonization of national state aid regulations with the Acquis
Communautaire, as well as implementation of EU standards in the area of state aid, with gradual
adjustment to the rules of market competition in the EU.
3.8.2.4. Employment plan


                                        Existing -                            Planned number of employees
          Institution                                     2007
                                        planned                      2008       2009        2010   2011          2012
      Ministry of Finance                Existing                     2          3            4     4             4
 Commission for State Aid
                                     Newly founded         7          7          7            7     7             7
    Control


3.8.2.5. Financial requirements
                              2008              2009               2010                2011               2012
      Budget                41,616.00€       50,320.00€          51,601.00€          51,601.00€      52,000.00€
                            180,000.00
 Foreign support
                            EU - TRIM




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3.9. FINANCIAL SERVICES
Further strengthening of the regulatory and supervisory framework for the financial institutions and
market in accordance with the EU law and practice are the key priorities of Montenegro in the area of
financial services, including banking sector, insurance sector and capital market.

3.9.1. BANKING SECTOR

3.9.1.1. Status
Legislative Framework
The reform of the banking system in Montenegro started with the enactment of the Law on Central
Bank of Montenegro (“Official Gazette of Republic of Montenegro (RMNE)”, No. 04/05) and the Law
on Banks (“Official Gazette of RMNE”, No. 55/03). These laws represent the basic regulatory
framework that governs the status and the operations of the Central Bank of Montenegro and banks in
Montenegro. Also, the special laws regulated specific areas regarding banking operations, such as the
Law on Bank Bankruptcy and Liquidation Proceedings (“Official Gazette of RMNE”, No. 47/01) and the
Law on Deposit Protection (“Official Gazette of RMNE”, No. 65/05).
The Law on Central Bank of Montenegro governs the institutional status of the Central Bank and its
powers and responsibilities. Pursuant to this Law, the Central Bank is independent organization of
Montenegro and is solely responsible for monetary policy, establishment and maintenance of the
sound banking system and efficient payment system. In that respect, the Central Bank issues bank
licenses, regulates and controls their operations, issues and conducts the measures for bank
rehabilitation, including opening and conducting the bankruptcy and liquidation proceedings in banks,
regulates, controls and provides efficient performance of the payment system, performs the operations
of a banker, advisor and fiscal representative of the government bodies and organizations, performs
macro economic analyses and participates in the preparation and drafting of the laws and secondary
legislation acts that govern the banking system.
The Law on Banks governs the founding, issuing of licenses, status changes, ownership changes,
operations, governance, management, control and the resolution of the status of any party involved in
provision of banking or financial services and products in Montenegro. The Law has been largely
complied with the EU Directive 32000R0012. Non-compliance with this document referred to the
inexistence of the possibility of founding and operating foreign bank branches at the territory of
Montenegro. Non-compliance resulted from the necessity to achieve the banking system reform and
its full stability in short period, whereas the existence of the branches would significantly influence on
the ability of the existing banks to adjust to the new regulatory framework, and new market and
competitive conditions.
The Law was prepared in a way that provided the basis for the implementation of all international
standards concerning the operations of banks through the secondary legislation acts, so that the
Central Bank brought, through the intensive enactment of secondary legislation acts, the compliance
with the mentioned EU regulation to the highest level.
The Law on Bank Bankruptcy and Liquidation Proceedings (“Official Gazette of RMNE”, No. 47/01)
regulated the conditions and the manner of the bank bankruptcy and liquidation proceedings, the
authorizations of the Central Bank in the proceedings, the manner of determining bankruptcy or
liquidation pool of assets and the manner of meeting the liabilities to depositors and creditors, as well
as the termination of the proceedings.
The Law on Deposit Protection (“Official Gazette of RMNE”, No. 65/05) regulated the obligations, the
condition and the manner of the deposit protection status, powers, responsibilities and financing of the
Deposit Protection Fund, management of the resources of the Fund and the manner and procedures
of the payment of the protected deposits.




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                                    Government of Montenegro


The Central Bank, as the regulator and the supervisor of the banking system, adopted the following
most important secondary legislation acts that govern and regulate bank operations in accordance
with the international standards:

   Decision on Procedure and Manner of Issuing Bank Licenses, Permits and Approvals, and on
   Amounts of Fees (“Official Gazette of RMNE”, No. 68/02), which precisely prescribes the
   procedure of submission of application and documentation for issuing license for operations to a
   bank and various approvals and permits, which issuance is under the authority of the Central
   Bank, as well as tariffs on the amount of fees paid to that purpose;
   Decision on the Manner and Procedures of and Fees for Bank Supervision (“Official Gazette of
   RMNE”, No. 70/04), which prescribes the procedure and the manner of performing the supervision,
   and the criteria and the amount of fees the Central Bank is charging for the performance of its
   supervisory function;
   Decision on Amendments to the Decision on Minimum Standards for Bank Capital (“Official
   Gazette of RMNE”, No. 62/06), which prescribes relative relations of the capital and assets of the
   bank, solvency ratio of the bank, as well as the procedures and the manner of calculation of
   parameters of operations with respect to bank capital;
   Decision on Asset Classifications, Provisions for Loan Losses and Reserves for Credit Risk
   (“Official Gazette of RMNE”, No. 59/07), which prescribes the procedure, the manner of
   determining, the amount and the allocation of provisions for loan losses and reserves for credit risk
   the banks are exposed to in their operations;
   Decision on Minimum Standards for Minimum Standards for Credit Risk Management and
   Operations with Bank Related Parties (“Official Gazette of RMNE”, No. 44/02), which prescribes
   the procedure, manner and methods of identification, measurement, management and control of
   credit risk, and the exposure limits and operations with bank related parties;
   Decision on Minimum Standards for Liquidity Risk Management of in Banks (“Official Gazette of
   RMNE”, No. 58/05), which prescribes the systems and strategies the banks are obliged to adopt
   and apply in identification, measurement and management of liquidity risk, and minimum amount
   of monetary funds that bank should have on daily, ten-day and long-term basis;
   Decision on Minimum Standards for Operational Risk Management (“Official Gazette of RMNE”,
   No. 08/05), which prescribed the procedures and manner of determining, management and control
   of operational risks in banks;
   Decision on Minimum Standards for Market Risk Management in Banks (“Official Gazette of
   RMNE”, No. 80/04), which prescribes the rules, procedures and methodologies for determining,
   management and control of market risks in banks;
   Decision on Minimum Standards for Country Risk Management (“Official Gazette of RMNE”, No.
   08/05), which prescribes the manner of determining, management and control of risk arising from
   the bank operations with banks operating outside of Montenegro;
   Decision on Micro Credit Financial Institutions (“Official Gazette of RMNE”, No. 01/03), which
   regulates the establishment, licensing and license revoking, operations and supervision of
   operations of micro-credit financial institutions;
Besides the above-mentioned secondary legislation acts, the Central Bank adopted and also applies
the following secondary legislation acts:
    Decision on Amendments to the Decision on Bank Reports to the Central Bank of Montenegro
    (“Official Gazette of RMNE”, No. 62/06);
    Decision on Bank Supervision on Consolidated Basis (“Official Gazette of RMNE”, No. 52/03);
    Decision on Chart of Accounts for Banks and Financial Institutions (“Official Gazette of RMNE”,
    No. 72/03);
    Decision on Bank Internal Audit (“Official Gazette of RMNE”, No. 72/03);
    Decision on Bank External Audit of Financial Statements (“Official Gazette of RMNE”, No. 37/01);
    Decision on Basics of Bank Internal Control System (“Official Gazette of RMNE”, No. 37/01);
    Decision on Conditions of Bank’s Acquisition and Handling of Own Shares (“Official Gazette of
    RMNE”, No. 72/03);

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   Decision on Content and Manner of Maintaining Register of Banks and Foreign Bank Affiliations
   (“Official Gazette of RMNE”, No. 67/02);
   Decision on Content and Manner of Maintaining Register of Foreign Bank Representative Offices
   (“Official Gazette of RMNE”, No. 67/02);
   Decision on Interim Administration of Banks (“Official Gazette of RMNE”, No. 26/03);
   Decision on Credit Unions (“Official Gazette of RMNE”, No. 01/03).
Institutional Framework
The Ministry of Finance is competent for financial policy, including laws from the banking area, while
secondary legislation acts and supervision of the banking system are exclusively under the
competence of the Central Bank of Montenegro. Other parts of the financial system are regulated and
controlled by the independent institutions established by special laws.
The Central Bank was established by the Law on Central Bank of Montenegro that became effective
on November 11, 2000, while the members of the Council of the Central Bank, as a body that governs
the Central Bank, were appointed in March 2001. The organizational structure of the Central Bank is
based on the character of its function as the regulator and the supervisor of the banking system. The
preparation and drafting of the secondary legislation acts regulating the operations and supervision of
the banks are under the competence of the Bank Supervision Department, while the Directorate for
Payment System Regulation and Control prepares the acts from the payment system area, and the
Banking and Financial Operations Department prepares and develops the acts from the area of
banking and financial operations. All secondary legislation acts are approved by the Council of the
Central Bank.
Bank Supervision Department has 33 employees that have exclusively university degree. The level of
employees’ training is high and all of them are included in some of the educational forms and training
organized by foreign institutions and organizations, and through internal forms of education. The
growth and development of the banking sector and its compliance with the new standards in bank
supervision resulted in periodical hiring of new employees, so that the dynamics of hiring new staff
was intensive, and in 2007, six new employees were hired, while hiring of seven new ones is pending.
Deposit Protection Fund is a legal entity established by the Law on Deposit Protection, which has an
account opened and funds deposited with the Central Bank of Montenegro. The Fund collects
premium from banks, determines premium rate, invests funds, makes payments of deposits up to the
level of protected deposit in case of initiating the bankruptcy proceedings in the bank and adopts
regulations within its scope of activities. The amount of the protected deposit is EUR 5,000 by
depositor, and all banks licensed by the Central Bank of Montenegro are obliged to pay the premium.
They are paid annually at the rate determined by the Fund with respect to the amount of deposits in
banks. The Fund is managed by Managing Board consisting of five members. The Fund is obliged to
inform the Central Bank of Montenegro on its operations at least once a year.
The Association of Montenegrin Banks was established in Montenegro as well, and it operates as non-
government organization. Its internal organization, scope of activities and the manner of functioning
are directly under the competence of banks that are also the founders of the Association.

3.9.1.2. Short-Term Priorities
Legislative Framework
The key priority in 2008 is the adoption of the new Law on Banks in the Parliament of Montenegro (the
first quarter). The EU Directives relevant for the establishment of the banking sector were the basis for
the drafting the Law on Banks.
The new law will be highly complied with the Directive 32006L0048 of the European Parliament and of
the Council relating to the taking up and pursuit of the business of credit institutions with the exception
that refers to operations of foreign banks in Montenegro through branches without the status of a legal
entity. This Directive allows banks to operate in other countries without special approval of the country
in which the branch is established, and the proposed law prescribes that the foreign bank branches in

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the Republic require the approval of the Central Bank. Since these provisions of the Directive refer to
the EU member-states, only after membership of Montenegro in EU, the conditions will be met for the
compliance of this part of the law with the Directive.
The Directive 32006L0049 of the European Parliament and of the Council on the capital adequacy of
investment firms and credit institutions legally verified Basel Capital Accord (so called Basel II), and
the dynamics and conditions for application is determined for the implementation of the resolutions
referred to in this Directive. The proposed law provided the basic elements contained in the relevant
Directive, and simultaneously, legal assumptions are created for the full implementation of the
Directive through the secondary legislation acts.
The proposed Law is also harmonised with the Directive 32002L0087 on the supplementary
supervision of credit institutions, insurance undertakings and investment firms in a financial
conglomerate, which governs the supervision of banks and banking groups on consolidated basis.
Pursuant to Article 143 of the Constitution of Montenegro, which regulates the institutional position of
the Central Bank, the adoption of the new Law on Central Bank is needed. The drafting and adopting
of this Law is envisaged within two years following the adoption of the Constitution.
Bearing in mind that the adoption of the new Law on Banks is pending, and the conditions for the
implementation of the Directive 32006L0049 of the European Parliament on the capital adequacy of
investment firms and credit institutions are being created, the Central Bank started with drafting and
adoption of the key secondary legislation act – Decision on Bank Capital Adequacy. The decision will
be adopted by 30 June 2008. The technical and professional EU assistance is provided in drafting of
the Decision.
Amendments to almost entire secondary legislation acts will be completed by the end of 2008 in the
part that provides the compliance with the details in the mentioned EU Directives.
In addition, the Central Bank will draft and adopt the Decision on minimum standards for interest rate
risk not resulting from bank trading activities in the first half 2008, Decision on the manner of
applicability of the Law on Banks to the supervision and operations of the branches of foreign banks,
Decision on the conditions for granting approvals for credit and guarantee operations, Decision on
minimum standards for bank’s investments in real estates and fixed assets, and the Decision on the
criteria and the procedure for determining concentration at financial market.
Institutional Framework
The projects of drafting and adopting the laws and secondary legislation acts do not require the
establishment of new institutions or substantial reorganisation of the existing ones. It is important to
point out the fact that the conditions for the functioning of the Ombudsman should be provided, as well
as its election and appointment and the number of the employees that will support the performance
thereof.
The banking Ombudsman will be elected within one year after the adoption and effectiveness of the
new Law on Banks. It will be elected by the Parliament of Montenegro. The Ombudsman is an
independent party that participates in out-of-court settlements in resolving disputed issues between
the clients and banks and financial institutions. In that respect, the Ombudsman reviews clients’
objections and propose to disputed parties a settlement or other way of completion of a dispute, gives
recommendations to banks and financial institutions for the improvement of their relationships with
clients, and advises clients with respect to the further conduction of the dispute. The proceedings
before the banking Ombudsman does not prevent the client from commencing the lawsuit under the
same matter before the competent court. The regulation of the Central Bank will prescribe in more
details the conditions which the banking Ombudsman should meet, the principles on which its
operations are based, powers and responsibilities, the manner of the provision of material and
technical conditions for its operations and the procedure of the protection of clients’ rights before the
banking Ombudsman.




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3.9.1.3. Mid -Term Priorities
Legislative Framework
For the purpose of further strengthening and development of the Central Bank’s function, mid-term
priorities in regulatory area are the following:
    Strengthen regulation through the adoption of best practices of management of specific risks
    prioritising their adoption at the annual level;
    Adopt corresponding decisions on minimum standards for risk management and capital adequacy
    based on the new Law on Banks;
    Adopt the regulation on minimum disclosure of information in accordance with Pillar III of Basel II
    and provide centralised disclosure of information;
    Establish the regulation referring to the consumer’s protection and activities of the banking
    ombudsman;
    Develop the self-regulation system of banks in management of individual risks and activities
    undertaken under mutual agreement on the strengthening of the market discipline;
    Determine the regulation that refers to financial conglomerates complied with the corresponding
    European directives;
    Pay special attention to the development of regulation that refers to corporate governance in
    banks.

3.9.2. INSURANCE AND PENSION INSURANCE

3.9.2.1. Status
Legislative Framework
The legal framework that covers the insurance system in Montenegro consists of the Law on
Insurance (“Official Gazette of RMNE”, Nos. 78/06 and 19/07), the Law on Compulsory Transport
Insurance (“Official Gazette of RMNE”, No. 46/07), and the Law on Bankruptcy and Liquidation
Proceedings of Insurance Companies (“Official Gazette of RMNE”, No. 11/07).
The Law on Insurance prescribes the manner of founding and rules of operations of the insurance
companies. This Law prescribes the manner of determining risk and classes of insurance based on
the principle of risk coverage, the form of insurance company, and the manner and rules on risk
management in insurance (capital adequacy, liquidity maintenance, determining of technical
provisions, and other measures for risk management). Beside the above-mentioned, the Law defines
reinsurance, powers and responsibilities of the authorised actuary, the procedures and rules of the
supervision of insurance companies, the manner and forms of the financial reporting, the rules for
conducting internal audit, the procedure of audit review performance, and forms and rules for
brokerage and agency activities and the provision of insurance ancillary services. This law also
prescribed the role and competence of the Insurance Supervision Agency as an independent
regulatory body.
The Law is partially in compliance with the primary sources of the European Union law (Treaty
establishing the European Community (EC Treaty), Part One, Principles, Article 2, and EC Treaty,
Part Three, Title 3, Chapter 3 Services, Article 51 Paragraph 2), and with the secondary sources of the
European Union law:
-   Directive 32002L0083 of the European Parliament and of the Council concerning life insurance;
-   First Council Directive 31973L0239 on the coordination of laws, regulations and administrative
    provisions relating to the taking-up and pursuit of the business of direct insurance other than life
    assurance;
-   Second Council Directive 31988L0357 on the coordination of laws, regulations and administrative
    provisions relating to direct insurance other than life assurance and laying down provisions to
    facilitate the effective exercise of freedom to provide services and amending Directive
    31973L0239.



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The Law on Compulsory Transport Insurance defines classes of compulsory insurances in transport
and terms and definitions that cover the areas of compulsory transport insurances. This Law
prescribes the procedure and the timeframe for the resolution of claims, and the right of the claimant
to the submission of the lawsuit; the establishment of the Association of Insurers – National Bureau of
the Insurers of Montenegro, which performs its operations through the special organizational parts:
Green Card Bureau, Guaranty Fund and Information Centre.
The Law is harmonized with the First, Second, Third and the Fourth Motor Insurance Directive as well
as with the Recommendation No. 5 of the European Commission UN for Europe –Sub-commission for
road traffic Annex 2 of the Resolution of the Economic Commission on easing road safety, and
general rules – Crete Inter-Bureaux Agreement.
The Law on Bankruptcy and Liquidation Proceeding of Insurance Companies prescribes the
bankruptcy and liquidation proceedings of insurance companies with respect to the application of the
Law on Business Organizations Insolvency. This area was not specified within EC Treaty, so that the
Law is completely harmonized with the primary sources of the EU law. Simultaneously, the Law is
partially harmonized with the secondary sources of EU law, i.e. Directive 32001L0017 of the European
Parliament and of the Council, since it does not contain the provision on urgent information of the
regulatory authorities of the EU member countries on opening the liquidation or bankruptcy
proceedings in the insurance companies and provision on the publication of the decision on
bankruptcy or liquidation of the insurance company in the Official Journal of the European
Communities. The deadline for full compliance with the EU regulations is the acquiring status of the
candidate for EU membership.
Pursuant to the Law on Insurance, the following secondary legislation acts were adopted in 2007:
− The Rules on the conditions for issuing licenses for insurance, brokerage, agency activities and for
   the provision of ancillary services in insurance, and on the manner of proving the fulfilment of such
   conditions (“Official Gazette of RMNE”, No. 08/07), and
− Instruction on the manner of determining the level of solvency margin (“Official Gazette of RMNE”,
   No. 24/07), for the purpose of harmonization with the First Council Directive on the coordination of
   laws, regulations and administrative provisions relating to the taking-up and pursuit of the business
   of direct insurance other than life assurance 31973L0239, the Fourth Council Directive on the
   annual accounts of certain types of companies 31978L0660, and Council Directive - 32002L0083.
The existing system of pension (and disability) insurance in Montenegro is regulated by the Pension
and Disability Insurance Law (“Official Gazette of RMNE”, No. 47/2007). The Pension and Disability
Insurance Law is in compliance with the Regulation 31971R1408 of the Council on the application of
social security schemes to employed persons and their families moving within the Community, and
with the Convention No. 121 Concerning Benefits in the Case of Employment Injury, and the Social
Security (Minimum Standards) Convention.
A number of secondary legislation acts was adopted for the implementation of the Pension and
Disability Insurance Law, which regulated in more details the specific issues needed for its
implementation (see Chapter 19.6).
Pursuant to the Pension and Disability Insurance Law, besides compulsory and disability insurance
based on current financing, the voluntary pension insurance is introduced in Montenegro based on the
individual capitalized savings. The Law on Voluntary Pension Funds was adopted in December 2006
(“Official Gazette of RMNE”, Nos. 78/06 and 14/07), and the Securities Commission adopted in
September 2007 all secondary legislation acts required for founding and operations of the voluntary
pension funds (see 3.9.3 – Capital Market). The Law was prepared in accordance with the Council
Directive 31998L049 on safeguarding the supplementary pension rights of employed and self-
employed persons moving within the Community.
Institutional Framework
Ministry of Finance is competent for the policy and legislation in the insurance area, and the Insurance
Supervision Agency is competent for the supervision and examination of the insurance, which is
independent in performing the activities within its scope of activities. The Agency was established in

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accordance with the Law on Insurance (“Official Gazette of RMNE”, No. 78/06). The founder of the
Agency is the Parliament of Montenegro, and the founder’s rights are performed on behalf of the
Agency by the Agency Council in accordance with the Law.
The Ministry of Health, Labour and Social Welfare is competent for the area of pension insurance, i.e.
Department for Pension and Disability Insurance and the Second Instance Administrative Procedure
Department. Deputy Minister for Pension and Disability Insurance and for War Veterans and Disability
Protection and 16 employees are engaged in this area.
The implementation of the compulsory pension insurance based on pay as you go system (Pillar I) is
within the scope of activities of the Fund for Pension and Disability Insurance, which is, based on the
prevailing legislation, relevant for the resolution of rights and obligations arising from the pension and
disability insurance. The Fund for Pension and Disability Insurance performs its function through the
Central service, nine regional services and four local offices employing total of 248 officers.
Voluntary pension funds and companies managing pension funds are involved in collection of capital
referred to in the Pillar III of the pension insurance. The supervision of the operations of the voluntary
pension funds is performed by the Securities Commission through the Department of Investment and
Pension Funds, employing 4 officers.

3.9.2.2. Short-Term Priorities
For the purpose of further harmonisation of the legal framework of the insurance market with the
regulation of the European Union, and pursuant to the provisions of the Law on Insurance, the Law on
Compulsory Transport Insurance and the Law on Bankruptcy and Liquidation Proceedings of the
Insurance Companies, the adoption of the following secondary legislation acts is envisaged by the end
of 2010:
    Rules on detailed criteria and the manner of calculating reserves for risk equalisation;
    Rules on detailed criteria and the manner of calculating claims outstanding;
    Rules on detailed criteria and the manner of calculating mathematical provisions in life insurance;
    Rules on detailed criteria and the manner of calculating of unearned premium;
    Rules on conditions for acquisition of title of the authorised actuary;
    Rules on content of authorised actuary’s opinion;
    Rules on statistical reports of insurance companies;
    Rules on internal controls system and risk management in the performance of insurance
    companies;
    Rules on the content of reports, notifications and other data the insurance company submits to the
    Insurance Supervision Agency and deadlines for their submission;
    Rules on the content and manner of passing the professional examination for performing
    brokerage or agency activities in insurance;
    Decision on the manner of evaluation balance sheet and off balance sheet positions;
    Rules on the manner of determining and monitoring liquidity of insurance companies;
    Rules on depositing and investing funds of insurance companies;
    Rules on the manner of keeping data of insurance companies;
    Rules on the manner of performing supervision;
    Rules on chart of accounts;
    Rules on determining income or loss by classes of insurance.
The purpose of the above-mentioned rules is the further harmonisation of Montenegrin legislation with
the most important EU Directives covering insurance and pension insurance areas.
The Insurance Supervision Agency, which is responsible pursuant to the Insurance Law for the
supervision and control of the insurance market, will monitor the implementation of the secondary
legislation acts by the insurance companies within its regular supervision and control of the operations
of the insurance companies.



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3.9.2.3. Mid-Term Priorities
Mid-term priority will represent full compliance of the laws with the European Union law through the
opening of insurance market in the part of providing the possibility of founding branches without status
of a legal entity. The development of the insurance sector in Montenegro will reach the level that also
allows the compliance of this part of the law with the European Directives by 2012. Under these
directives there is territorial openness for performing these operations. Simultaneously, the minimum
sums insured in the part of compulsory insurance will be harmonised with the amounts of sums
insured as prescribed by the European Union regulations.
Amendments to the Law on Insurance, Law on Compulsory Transport Insurance and the Law on
Bankruptcy and Liquidation Proceedings of Insurance Companies will be adopted by 2012, which will
harmonise the above-mentioned laws with EU laws in this area.
The Law on Amendments to the Law on Voluntary Pension Funds will be drafted by the end 2012, and
it will be completely harmonised with the Directive 32003L0041 of the European Parliament and of the
Council on the activities and supervision of institutions for occupational retirement provisions, and the
Council Directive 31998L0049 on safeguarding the supplementary pension rights of employed and
self-employed persons moving within the Community.
Based on the decision of the Government of Montenegro, which will determine the dynamics of the
introduction of the Pillar II of the pension insurance, the adoption of the Law on Compulsory Pension
Insurance based on individual capitalized savings will be adopted by 2012.

3.9.2.4. Employment plan

           Institution                 Existing -       2007                Planned number of employees
                                       Planned
                                                                   2008          2009      2010        2011          2012
Insurance Supervision Agency           Existing           8          20          25          30         30            30
Note: The above-mentioned number of employees refers to the number of employees and the members of the Agency
Council.

3.9.2.5. Financial requirements
The Insurance Supervision Agency is funded by its own funds, which are provided from the fees
determined by the Law on Insurance. For the purpose of accomplishing short-term and long-term
priorities for staff education and expert assistance, the Agency will require the following funds:


                                   2008              2009                 2010            2011                2012
        Own funds                206,864            217,207            228,067          239,470            251,443
      Foreign support            206,864            217,207            228,067          239,470            251,443
Note 1: Item “own funds” includes the funds intended for education and training of staff both in the country and abroad,
expertise and technical assistance.
Note 2: The Insurance Supervision Agency accomplished the cooperation with various donors in the part of provision of
support and assistance related to the organisational and technical support. The cooperation with USAID has been performed
so far, which defined the framework for long-term support, and with the European Agency for Reconstruction and
Development. Simultaneously, the future cooperation with various donors is planned with the purpose of organizational and
professional training of the Agency and harmonisation of local legislation with the European Union legislation.




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3.9.3. CAPITAL MARKET

3.9.3.1. Status
Legislative framework
The Law on Securities adopted in December 2000 governs the area of capital market.
This law regulates for the first time in Montenegro, in accordance with the international principles, all
issues that completely provide the functioning of the securities market: issuance and trade in those
securities, rights and obligations of entities - participants on the securities market, and the
organization, scope of activities and competency of the Securities Commission of Montenegro. The
regulations of the Federal State that existed in the past applied until 2001, when this law came into
force.
This law is partially harmonised with the EU law and with the standards determined in key European
acts from this area.
The Law on Amendments to the Law on Securities adopted in April 2006 performed further
harmonisation of this area with the EU law.
The Amendments to the Law define the term of debt securities and long-term and short-term debt
securities and it regulates the manner of issuing and trading with short-term securities. The
Amendments to the Law also regulate the concept of closed offering of securities (not based on a
public invitation) and the concept of the securities issued to already kno