Enlargement Strategy and Main Challenges 2006 - 2007

Willingness to advance in the area of the fight against corruption has increased, in particular
through the adoption of a number of planning documents by the Government and in
improvements in reporting. The Anti-Corruption directorate has started to send cases to
competent bodies. However, corruption remains a widespread problem in Montenegro and the
overall legal and institutional set-up presents loopholes which allow for corruption and limit
the capacity of the state to effectively prevent and prosecute corruption. The Parliament failed
to amend the law on conflict of interest, which needs to be substantially reviewed and
enforced with determination.
In the area of human rights and protection of minorities Montenegro is at an early phase in
the process of putting in place a legal and institutional set-up following independence. In the
next period particular attention needs to be paid to constitutional guarantees for human and
minority rights, including in prisons, religious freedom, non-discrimination and the situation
of Roma and refugees. Media independence and professionalism need to be strengthened and
the law on access to information be implemented with more determination. The independence
of the broadcasting authority should be maintained.
Concerning regional issues and international obligations, co-operation with the ICTY is
currently satisfactory, in line with a key European Partnership priority. This should be
maintained. The ongoing investigation in relation to the case of the disappearance of a number
of Bosnian refugees in 1992 is a matter of concern. Montenegro is committed in regional
cooperation. It is an active participant of regional initiatives such as in the fields of aviation,
transport infrastructure and energy. It enjoys good relations with neighbouring countries.
Following independence, the smooth settlement of pending issues with Serbia has been a
contribution to regional stability. Montenegro maintained a constructive approach on Kosovo,
which was a key priority under the European Partnership.
As regards economic criteria, Montenegro has made some progress towards being a
functioning market economy. Further reform efforts must also be pursued in order to enable it
to cope with competitive pressure and market forces within the Union.
The country has maintained a broad consensus on the essentials of economic policies.
Macroeconomic stability is getting firmer. In particular, economic growth has gained pace
and inflation has remained subdued. Public debt has been reduced and budgetary revenues
increased further. Foreign direct investment remained robust. Price liberalisation is almost
complete. The privatisation programme is well advanced and business registration has been
further facilitated. The capacity of the judiciary to deal with commercial disputes has
improved. Financial intermediation has deepened and the restructuring of network industries
is underway.
However, economic growth remains dependent on a few key sectors and enterprises. External
imbalances widened. The labour market remains rigid and unemployment high. The financial
audit system, both for internal and external controls, needs to be upgraded. The business
environment is still hampered by the regulatory environment, including at municipal level.
The level of infrastructure investment is low. Debt and arrears from some public enterprises to
the government are very significant. The state aid structure must be strengthened. A system of
ex ante control of all new aid measures needs to be set up. Public enterprises are still awaiting
further restructuring and the privatisation plan is only partly completed. Trade openness and
trade integration with the EU has recently risen, but is still at fairly modest levels.
Privatisation procedures need to be efficient and fair.
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