Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

Executive Summary
v
further decompression is possible if the government focuses such increases toward the
skilled and professional positions.
• Enhance the capacity of the Civil Service Agency--through staffing and technical
assistance--to implement a credible performance appraisal system and move toward a
performance-based pay system. While it is common within the public sector to adjust pay
based on the years of experience, seniority has too large an impact in the Montenegrin
system. Civil servants and public employees can receive up to 35% of base pay as a
bonus for length of service. However, those with the longest tenure will not necessarily
have the most needed skills, and the continuation of the current system undermines
performance-based principles. Since the bonuses are part of the General Collective
Agreements that that government signs with unions, it is essential that changes are sought
and initiated at this level to progressively reduce the impact of seniority in the calculation
of total pay.
15. Over the medium term, Montenegro faces continued challenges to simplify and
streamline the state administrative structure. Overlapping responsibilities and fragmented
organizational structures impede effective policy coordination, weaken governance, and add to
the cost of running government. The Government should thus build on the existing Law on State
Administration and conduct a horizontal review of government functions that may lead to
streamlining ministerial accountability and setting of government-wide priorities. Plans to
introduce program budgeting can, in that respect, help to clarify the current priorities and
facilitate the evaluation of trade-offs. More specific measures the Government should consider
over the medium term:
• Undertake a horizontal review of government functions and activities, with the aim to
abolish “left-over” structures from the previous system and to strengthen capacities in the
functions and activities most needed to support effective EU integration. A relatively
under-developed central apparatus of the state administration is increasingly called upon
to coordinate and manage a plethora of subordinated institutions. This in turn weakens
the overall governance process and adds an unnecessary administrative cost to running
government. Such horizontal reviews should be integrated into the ongoing budget
reforms led by the Ministry of Finance.
• Strengthen the management structures and administrative capacity for EU integration.
Montenegro’s ability to successfully conclude negotiations with the EU during the SAA
and beyond will require the creation of a much enhanced level of public administration
capacity with respect to intellectual property rights protection; standardization and
accreditation of products, processes and services, national statistics; visa, asylum, and
border management; civil aviation; and meteorology. Further needs and lessons for
institutional strengthening and administrative capacity for EU accession should be drawn
from a comparative assessment of how the EU process has been managed in countries of
similar size as Montenegro.
16. Again, while a number of functional areas that are vital to EU accession are currently
under-developed, they can only be enhanced by shifting resources (human and financial) away
from current inefficient functions. Measures to reduce the costs of public employment and wage