Democracy and Governance in Montenegro
The Development Challenge:
Montenegro is one of two republics of the country of the State Union of Serbia and Montenegro. According to the final results of the November 2003 population census issued by the Bureau of Statistics, Montenegro is approximately one-sixth the geographical size of Serbia with 616,000 inhabitants (less than one tenth of Serbia's population). The ethnic composition is considered to be predominantly Montenegrin (43.16%) and Serbian (31.99%). The remaining 24.85% of the population is made of Bosniak (7.77%), Albanian (5.03%), Muslim (3.97%), Croatian (1.1%), Roma (0.42%), and other (6.56%) population.
Driven by the goal of European Union integration, the Government of Montenegro (GOM) launched a substantial Economic Reform Agenda in March 2003. The legislative and institutional frameworks needed for moving toward a consolidated democratic system, free market, and Euro-Atlantic integration have progressed significantly but are not yet complete. The profound divisions present in Montenegro over the issue of redefining or terminating the relationship between Montenegro and Serbia, the systemic deficiencies, and the endemic corruption, political patronage and nepotism continue to constrain the reform process. Opportunity to address critical political issues in 2004 stalled as the opposition party boycotted Parliament through October. On the other hand, in the absence of a parliamentary opposition, the governing party succeeded in passing 67 pieces of important reform legislation.
Public opinion tracking shows that satisfaction with the government and its performance has increased 3%. Inflation continued to fall from 7.5% in 2003 to 5% in 2004, the financial sector showed marked improvement and new commercial laws were implemented at a reasonable pace. Although Montenegro continues to have a relatively high current account deficit, the gap appears to be more than made up by unrecorded financing flows, including some portion of flows from tourism receipts that fall into the gray economy. Nevertheless the active economic reforms have not yet led to markedly higher levels of growth or decreased unemployment. The 2003 Poverty Reduction Strategy Paper reported an absolute poverty rate in Montenegro of 12.2%, with more than one third of the population classified as economically vulnerable. Given regional variations, this figure is 19.3% in the north, representing 45% of the total poor in the republic. The average recorded net monthly wage in the formal sector according to official statistics is about 145 Euros (or according to other sources about 250 Euros per month when the informal sector is accounted for). Gross domestic product remains near 1990 levels (about 1.4 billion Euros) and unemployment once adjusted for the gray market is around 17%. The ongoing struggle with corruption continues to impede private sector growth as continuing distrust in the system drives entrepreneurs into the gray economy.
The GOM must address the task of passing remaining legislation to address social, economic, and political problems in the coming year, and continue to demonstrate the capacity to implement those laws that have already been approved. The status of the State Union of Serbia and Montenegro will influence the reform process in Montenegro over the next year.
(Excerpted from the 2006 Congressional Budget Justification for Montenegro)
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