Content
Montenegro
Content
Situation and cooperation
Development cooperation with Montenegro was launched in 1999, when the Montenegrin government distanced itself from the then Serbian President, Slobodan Milosevic. Since Milosevic fell from power in 2000, Montenegro has changed dramatically – today it is politically and economically stable.
Montenegro's economy had been growing steadily in recent years – in 2007, by some 8 per cent. Tourism, financial services and the property market in particular showed the strongest growth. Inflation went down. The banking sector was one of the most important drivers of Montenegro's economy at that time. Then, in late 2008, a number of banks experienced liquidity problems because of the global financial crisis and, as a result, economic growth was severely curtailed. However, experts expect Montenegro's economy to recover in 2011 and the following years and forecast annual growth of over 4 per cent.
An important step for Montenegro's economy was the introduction of the euro as the national currency. Gross national income is, however, still well below the level enjoyed before the disintegration of Yugoslavia. According to the latest EU progress report, published in 2009, per capita income in Montenegro is only 46 per cent of the EU average.
Since the Republic of Serbia was the official successor state to the former state union, Montenegro had to apply to join international organisations in its own right after gaining independence. Its efforts bore fruit: in its first year of independence, Montenegro became a member of the United Nations, the Organization for Security and Co-operation in Europe (OSCE), the World Bank and the International Monetary Fund (IMF). Since December 2009, Montenegro has also been an official candidate for NATO membership.
Montenegro has made systematic progress with its pro-European reforms. In 2007, it adopted its first constitution and signed a Stabilisation and Association Agreement (SAA) with the European Union. In June 2008, Montenegro's government adopted a national programme to pave the way for integration into the EU. The programme covers the four-year period from 2008 to 2012. Furthermore, in 2009, it created a Ministry for European Integration. In December 2010, the EU heads of state and government decided to officially make Montenegro an EU accession country.
Montenegro will, in the future, have to meet EU-defined standards with regard to the rule of law, stable democratic and free-market structures, wide-ranging human rights and minority rights legislation and appropriate legislation and efficient government administration. In its latest progress report, the EU criticised the judiciary's lack of independence, parliament's weakness and the inadequacies in public administration. Nepotism, widespread corruption and the influence of organised crime are also seen as key obstacles to development. On Transparency International's 2010 Corruption Perception Index, Montenegro is ranked 69th out of 178 countries.
Development potential in Montenegro
Thanks to its location on the Adriatic and its largely unspoilt countryside, Montenegro has excellent potential for developing tourism as the mainstay of its economy. The sector already accounts for around 20 per cent of gross domestic product. In 2009, Montenegro had 1.2 million tourists, 89 per cent of whom came from abroad.
Some of the region's finest sandy beaches are in Montenegro, with the bathing season lasting from May to November and with spectacular nature parks offering diverse opportunities for sports and nature tourism. However, if this potential is to be fully harnessed, it will be necessary to make significant improvements to the infrastructure, especially in the coastal areas. This will include guaranteeing uninterrupted power supplies, restoring and modernising the water supply and sanitation systems and creating a stable economic setting in which, above all, small and medium-sized enterprises are able to thrive.
To strengthen Montenegro's position as a tourist destination, it will be necessary to introduce international standards with regard to hotel service, management and facilities. Montenegro also needs to improve its image.
Priority areas of German cooperation with Montenegro
Development cooperation between Germany and Montenegro is successful and is based on mutual trust. Since cooperation began in 1999, Germany has been Montenegro's largest bilateral donor. The aim of all its assistance is to support Montenegro in its endeavours to achieve EU standards, thus fostering the country's integration into the EU.
At government negotiations in October 2010, the German government committed funds of up to 21 million euros for Montenegro – 20 million euros for Financial Cooperation and 1 million euros for Technical Cooperation.
The following were agreed as priority areas of cooperation:
-
energy (reform of the energy sector, renewable energies, energy efficiency)
-
water (water supply and sanitation)
-
sustainable economic development (promoting the private sector, tourism and training).
As a result of organisational and structural changes to Germany's development cooperation and a greater focus on the aims of European integration, a gradual progress began in 2010 whereby Montenegro will eventually only receive support as part of regional development programmes.
Energy
As Montenegro's infrastructure was outdated and had suffered badly as a result of the war and the lack of investment, Montenegro was dependent on importing electricity from its neighbours. The focus of cooperation in the first few years was therefore on restoring the country's power supply. Since then, the focus has shifted to the ecological development of the energy sector in line with EU standards and the promotion of energy efficiency.
One focus of German support is the modernisation of the two hydropower plants at Perucica and Piva. They have the potential to provide the country with uninterrupted supplies of power while at the same time reducing its dependence on foreign power suppliers. In order to reduce the amount of energy consumed by end users, an energy efficiency fund is to create financial incentives to save energy. Small and medium-sized enterprises as well as private households can take out loans from this fund in order to buy more efficient machines or to insulate buildings.
Water
In Montenegro, a sufficient supply of water to the coastal region is a key factor in developing the tourist infrastructure. Here, Germany is supporting the development and implementation of a master plan for drinking water supplies and sanitation. Development cooperation in this sector started in 2003, since when the supply of drinking water in the country's towns and cities has improved dramatically. Currently, the building and operation of two sewage treatment plans is being financed as part of German development cooperation. These plants are important to the development of tourism and the protection of the environment in coastal regions.
Sustainable economic development
The focus of support in this priority area is on developing the tourism industry. In 2008, the GTZ (now GIZ) helped Montenegro to update and revise the tourism master plan originally conceived for the country by the German Investment and Development Company, DEG.
A vocational training programme is in place which will promote training schemes in tourism. In addition, the establishment of regional associations and a national tourism board are being supported through German development cooperation.
In a move to complement these tourism development efforts, projects are being funded that will improve the general environment for foreign investors.
The establishment of a land registry system and a regional development plan is intended to resolve issues of ownership and to improve legal certainty for domestic and foreign investors. Furthermore, Germany is supporting the further development of an audit office in Montenegro, the purpose of which is to oversee the efficient use of public funds.
Small and medium-sized enterprises (SMEs) play an important role in the creation of jobs. However, in Montenegro they have so far had hardly any opportunity to finance their investments through loans. This has severely limited their room for manoeuvre. The BMZ, together with KfW and other donors including Switzerland, Austria and the European Bank for Reconstruction and Development, has set up the European Fund for Southeast Europe (EFSE), which is active throughout the region.
The purpose of the Fund is to make small and micro loans available to SMEs at preferential rates through local partner institutions. It operates as a revolving fund, which means that loan repayments are used to fund new loans. Thus, the Fund will stay in existence over the long term and will be able to promote SMEs until such time as appropriate structures have been established in Montenegro. Parallel to this, training is being given to bank employees. By the end of 2008, a volume of 40 million euros had been made available for the granting of such loans in Montenegro.
Information
Publications
-
Development needs sustainable energy
Topics 187
(PDF 2.5 MB, accessible) -
Promoting Resilient States and Constructive State-Society Relations – Legitimacy, Transparency and Accountability
Special 168
(PDF 495 KB, accessible) -
The Development Policy of the European Union
Strategies 150
(PDF 821 KB, accessible)
