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Economy of Montenegro

Montenegro has natural resources, primarily bauxite, adequate water supplies, and a climate conducive to agriculture and tourism. The establishment of the bauxite-alumina-aluminum industry after World War II provided Montenegro with a core strategic industry; it has suffered from high production costs since the first energy crisis in 1973. In the 1960s, tourism began its initial growth, largely attracting visitors from Eastern Europe and Yugoslavia. War and sanctions in the early 1990s hit Montenegro hard, and significant recovery began only after the end of the Kosovo crisis in 1999 and the adoption of the deutschmark (DM) in November 1999, which largely disconnected Montenegro's economy from Serbia and the Serbian dinar.

The global financial crisis had a significant negative impact on the economy, largely due to the ongoing credit crunch, a decline in the real estate sector, and a fall in aluminum exports. On March 31, 2010, Standard & Poor's Ratings Services lowered the long-term sovereign credit rating on Montenegro from 'BB+' to 'BB', while also affirming the short-term sovereign credit rating at 'B'.

During the last few years, Montenegro has created a largely business-friendly investment climate. The Euro replaced the DM on March 31, 2002. The country established the lowest corporate tax rate in the region (9%). More than 90% of capital value in Montenegrin companies had been privatized by July 2010, although there have been some setbacks to the privatization agenda. In October 2010, the government regained part ownership in a previously privatized aluminum company that had been plagued with strikes and lawsuits since its privatization. Under the agreement, the government received a 29.4% stake in the company and a 31% stake in the associated bauxite mine, as well as seats on the boards of both companies. However, the banking sector, telecommunications, and oil import and distribution in Montenegro are 100% privately owned. The biggest improvement Montenegro has made has been in the area of tax policy. Montenegro introduced value added tax (VAT) in April 2003, and established tax rates of 17% and 7% (for tourism and staple food items) as of January 2006. The lower VAT rate for tourism is to encourage growth in this strategic industry. Montenegro also decreased the personal income tax (PIT) and implemented a 9% flat rate in January 2010.

There has been a rapid growth in tourism and tourism investments, particularly along the Adriatic coast, in the years since independence. The independent World Travel and Tourism Council repeatedly has ranked Montenegro as the top-growing tourism destination in the world, with growth estimated at 10% annually through 2016. Net foreign direct investment (FDI) in 2010 reached $935.1 million, and investment per capita in Montenegro is among the highest in Europe. However, investment has slowed recently, in part as a result of the global economic crisis. According to projections of the Montenegrin Investment Promotion Agency, FDI in 2011 will range between €660 million and €730 million ($892 million and $986 million). The total value of FDI in 2011 will, to a great extent, be related to privatization projects and spatial plans that allow for greenfield investments.

GDP (2010): $4.087 billion (€3.025 billion, at January 2011 exchange rate).
Real GDP growth rate (2010 est.): 0.5%.
Per capita GDP (2010): $6,481 (€4,797, at January 2011 exchange rate).
Inflation rate (2010): 0.8%.
Natural resources: Bauxite, hydropower, timber.
Trade: 12% of GDP.
Industry: 11.3% of GDP.
Transport: 9.5% of GDP.
Real estate: 8.4% of GDP.
Agriculture: 8.3% of GDP.
Trade (2010): Exports--$446.3 million (€330.3 million). Major markets--Serbia ($101.2 million; €74.9 million), Greece ($76.2 million; €56.4 million), and Italy ($65.9 million; €48.8 million). Imports--$2.235 billion (€1.654 billion). Major suppliers--Serbia ($584 million; €432.2 million), Bosnia and Herzegovina ($166.8 million; €123.5 million), and Germany ($157.9 million; €116.9 million).

Geography of Montenegro

Area: Montenegro (13,938 sq. km.) is slightly smaller than Connecticut.
Cities: Capital--Podgorica. Other cities--Bar, Berane, Bijelo Polje, Budva, Cetinje, Herceg Novi, Kotor, Niksic, Pljevlja, Tivat, Ulcinj.
Terrain: Varied; mountainous regions with thick forests; central plains; southwestern Adriatic coast with high shoreline with very few islands off the coast.
Climate: Generally continental; Mediterranean along the coast.

 

Government of Montenegro

Following Montenegro's declaration of independence, the first parliamentary elections were held on September 10, 2006. Both domestic and international observers assessed the elections as being generally in line with international standards. Zeljko Sturanovic of the Democratic Party of Socialists (DPS) was appointed as Prime Minister. The newly elected Montenegrin parliament began work on the country's first post-independence constitution, which was adopted on October 19, 2007. The constitution, among other things, changed the country's official name to "Montenegro."

Following the resignation of Prime Minister Sturanovic owing to health reasons in February 2008, President Filip Vujanovic nominated (and parliament approved) the leader of the ruling DPS, former Montenegrin President and Prime Minister Milo Djukanovic, as head of the government. Presidential elections were held on April 6, 2008, and incumbent President Vujanovic was elected for a second 5-year term with 52% of the vote. Domestic and international observers assessed this election as being generally in line with international standards. On March 29, 2009, Montenegro held its second parliamentary elections, which according to international observers met almost all international standards. On June 10, 2009, the new parliament re-elected Prime Minister Djukanovic to a sixth term. Prime Minister Djukanovic resigned from office on December 21, 2010, while remaining President of the ruling DPS party. On December 29, 2010, the Montenegrin parliament approved President Vujanovic’s nomination of Igor Luksic as the next Prime Minister. Luksic, also from the DPS, had been serving as Minister of Finance under Prime Minister Djukanovic since 2004. At 34 years of age, he became the youngest head of government in the world. After taking office, Prime Minister Luksic consolidated some cabinet agencies and created a stand-alone Ministry of Science. He appointed some new cabinet ministers, but kept many familiar faces in his cabinet, including Minister of Foreign Affairs Milan Rocen and Minister of Defense Boro Vucinic.

European and Euro-Atlantic integration has been one of the driving forces behind the reform process that led to the signing of a Stabilization and Association Agreement (SAA) with the European Union (EU) on October 15, 2007. On May 1, 2010, the SAA came into force after ratification by all 27 EU member states. On November 9, 2010, the European Commission recommended that Montenegro be approved as an EU candidate country and that accession negotiations begin after seven “key priorities” are addressed. That decision was ratified by the European Council, and EU candidate status was granted on December 17, 2010. Montenegro now awaits a confirmed date for the start of accession negotiations with the EU. Citizens overwhelmingly support EU membership, although the country faces continued challenges in its quest for Euro-Atlantic integration. The government continues to promote reforms designed to bring Montenegro closer to Euro-Atlantic institutions.

Despite considerable progress since independence and success in maintaining inter-ethnic harmony, some ethnic tensions remain. The country must also cope with the significant challenges involved in strengthening the rule of law. Numerous international observers, non-governmental organizations (NGOs), think tanks, and media have reported on Montenegro’s significant problems with organized crime and corruption, which are widely believed to be pervasive at all levels of society. In addition to these issues, there is a significant disparity in incomes between the rural, ex-industrial northern regions of Montenegro and the more prosperous central and coastal regions. In June 2010, the Department of State’s Trafficking in Persons (TIP) annual report upgraded Montenegro from Tier 2 Watch List to Tier 2, citing the country’s significant efforts in attempting to meet minimum standards for the elimination of trafficking.

Legislature
The parliament is Montenegro's lawmaking body. Parliament has 81 members elected in general elections. As of April 2009, the governing DPS/SDP/BS/HGI/DUA coalition had 48 seats in parliament, followed by the SNP (16 seats), NOVA (8), PzP (5), FORCA (1), Albanian List coalition (composed of the Democratic Alliance in Montenegro and the Albanian Alternative) (1), and the Albanian Coalition-Perspektiva (composed of Party of Democratic Unity of Albanians and a group of citizens represented by Amir Hollaj) (1).

Principal Government Officials
President--Filip Vujanovic (DPS)
Prime Minister--Igor Luksic (DPS)
Foreign Minister--Milan Rocen (DPS)
Defense Minister--Boro Vucinic (DPS)
Speaker of the Parliament--Ranko Krivokapic (SDP)

Type: Republic.
Constitution: Adopted October 19, 2007 and proclaimed October 22, 2007.
Independence: June 3, 2006 (declared by parliament after referendum in favor of independence from state union of Serbia and Montenegro).
Branches: Executive--president (chief of state); prime minister (head of government). Legislative--Montenegrin parliament. Judicial--Constitutional Court and Supreme Court.
Political parties (in alphabetical order): Albanian Alternative (AA), Albanian Coalition “Perspective”, Bosniak Democratic Party, Bosniak Party (BS), Croatian Civic Initiative (HGI), Democratic Center (DC), Democratic League in Montenegro (DSCG), Democratic Party of Socialists (DPS), Democratic Party of Unity, Democratic Serbian Party (DSS), Democratic Union of Albanians (DUA), Democratic Union of Muslims-Bosniaks, FORCA, Green Party of Montenegro, Homeland Serbian Party, Liberal Party (LP), Montenegrin Communists, Movement for Change (PZP), New Serbian Democracy (NOVA), Party of Democratic Prosperity, Party of Pensioners and Invalids of Montenegro, Party of Serbian Radicals (SSR), Party of Serbian Unity (SSJ), People's Party of Montenegro (NS), People's Socialist Party (NSS), Serbian National List, Social Democratic Party (SDP), and Socialist People's Party (SNP).
Suffrage: Universal at 18.

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History of Montenegro

Montenegro resisted the rule of the Ottoman Turks, maintaining its independence and playing off its powerful neighbors against each other. Montenegro was recognized as an independent and sovereign principality by the Great Powers of Europe assembled at the Congress of Berlin on July 13, 1878. During World War I, Montenegro fought on the side of the Allies but was defeated and occupied by Austria. Upon Austrian occupation, the Montenegrin king, King Nikola I, and his government went into exile. In late 1918, an Assembly met in Podgorica, and under the eyes of the Serbian army, deposed King Nikola and declared unification with Serbia. The government of Montenegro in exile denounced the Assembly's action, to no avail. From 1919 to 1941, Montenegro was part of what became known as the Kingdom of Yugoslavia, despite armed resistance in the early 1920s to rule from Belgrade. When Yugoslavia was invaded and partitioned by the Axis powers in April 1941, Montenegro was appropriated by the Italians under a nominally autonomous administration. While some Montenegrins sided with Italy, motivated by antipathy against past rule from Belgrade, the Partisan Revolt in Montenegro began early, on July 13, 1941, and initially scored impressive successes against the Italian occupiers. Throughout World War II, Montenegro served as an effective base and refuge for Tito's Partisans. After the war, Montenegro was granted the status of a republic within Yugoslavia. The breakup of the Yugoslav federation after 1989 left Montenegro in a precarious position. Between 1991 and 1992, Slovenia, Croatia, Bosnia and Herzegovina, and Macedonia all seceded from Yugoslavia. On April 27, 1992, in Belgrade, Serbia and Montenegro joined in passing the Constitution of the Federal Republic of Yugoslavia. Though Montenegro reaffirmed its political attachment to Serbia, a sense of a distinct Montenegrin identity continued to thrive. The government of Montenegro was critical of Yugoslav President Slobodan Milosevic's 1998-99 campaign in Kosovo, and the ruling coalition parties boycotted the September 2000 federal elections, which led to the eventual removal of Milosevic's regime. In March 2002, the Belgrade Agreement was signed by the heads of the federal and republican governments, setting forth the parameters for a redefinition of Montenegro's relationship with Serbia within a joint state. On February 4, 2003, the F.R.Y. parliament ratified the Constitutional Charter, establishing a new state union and changing the name of the country from Yugoslavia to Serbia and Montenegro. On May 21, 2006, the Republic of Montenegro held a successful referendum on independence and formally declared independence on June 3, 2006.

People of Montenegro

Montenegro resisted the rule of the Ottoman Turks, maintaining its independence and playing off its powerful neighbors against each other. Montenegro was recognized as an independent and sovereign principality by the Great Powers of Europe assembled at the Congress of Berlin on July 13, 1878. During World War I, Montenegro fought on the side of the Allies but was defeated and occupied by Austria. Upon Austrian occupation, the Montenegrin king, King Nikola I, and his government went into exile. In late 1918, an Assembly met in Podgorica, and under the eyes of the Serbian army, deposed King Nikola and declared unification with Serbia. The government of Montenegro in exile denounced the Assembly's action, to no avail. From 1919 to 1941, Montenegro was part of what became known as the Kingdom of Yugoslavia, despite armed resistance in the early 1920s to rule from Belgrade. When Yugoslavia was invaded and partitioned by the Axis powers in April 1941, Montenegro was appropriated by the Italians under a nominally autonomous administration. While some Montenegrins sided with Italy, motivated by antipathy against past rule from Belgrade, the Partisan Revolt in Montenegro began early, on July 13, 1941, and initially scored impressive successes against the Italian occupiers. Throughout World War II, Montenegro served as an effective base and refuge for Tito's Partisans. After the war, Montenegro was granted the status of a republic within Yugoslavia. The breakup of the Yugoslav federation after 1989 left Montenegro in a precarious position. Between 1991 and 1992, Slovenia, Croatia, Bosnia and Herzegovina, and Macedonia all seceded from Yugoslavia. On April 27, 1992, in Belgrade, Serbia and Montenegro joined in passing the Constitution of the Federal Republic of Yugoslavia. Though Montenegro reaffirmed its political attachment to Serbia, a sense of a distinct Montenegrin identity continued to thrive. The government of Montenegro was critical of Yugoslav President Slobodan Milosevic's 1998-99 campaign in Kosovo, and the ruling coalition parties boycotted the September 2000 federal elections, which led to the eventual removal of Milosevic's regime. In March 2002, the Belgrade Agreement was signed by the heads of the federal and republican governments, setting forth the parameters for a redefinition of Montenegro's relationship with Serbia within a joint state. On February 4, 2003, the F.R.Y. parliament ratified the Constitutional Charter, establishing a new state union and changing the name of the country from Yugoslavia to Serbia and Montenegro. On May 21, 2006, the Republic of Montenegro held a successful referendum on independence and formally declared independence on June 3, 2006. People Nationality: Noun --Montenegrin(s); adjective --Montenegrin. Population (2003 Republic census) : 630,548. Population growth rate (2010 EU Progress Report): 4.1%. Ethnic groups (2003 census): Montenegrin 43%, Serbian 32%, Bosniak 8%, Albanian 5%, Muslim 5%, other (Croatian, Roma) 7%. Religions (2003 census): Orthodox 74%, Muslim 18%, Roman Catholic 4%, other 4%. Languages (2003 census): Serbian 64%, Montenegrin 22%, Albanian 5.3%, Bosnian 5.5%, Croatian 0.4%, Roma 0.4%, unspecified 2.4%. The October 2007 constitution established Montenegrin as the official language, and decreed that Serbian, Bosniak, Albanian, and Croatian also may be used officially. Health (2010 EU Progress Report): Infant mortality rate --5.7 deaths/1,000 (2009 data). Life expectancy --male 71.7 yrs., female 76.6 yrs. (2009 data).