Economy in Montenegro
The EU will "fully respect" the successful outcome of the 21 May referendum in which Montenegrins decided to sever a union with Serbia, EU foreign policy chief Javier Solana has said.
Montenegro is a republic of 650,000 citizens on the Adriatic coast within the Balkan Peninsula and the Federal Republic of Yugoslavia. It is a modern society that has embraced the Euro, reforming its fiscal system, adopting transparent regulations in cooperation with foreign organizations, while developing new business opportunities through privatization and the diversification of its economy. As of 4th February 2003 the Federal Republic of Yugoslavia formally ceased to exist after ratification of the new State Union law in the Parliaments of Serbia and Montenegro. A new, looser union, known formally as the State Union of Serbia and Montenegro officially came into place on this date. In 2006, both States will have the option of a referendum on independence. Serbia and Montenegro is the last of the major European transitional economies. As such it provides significant opportunities for both exporters and investors that are unlikely to be repeated.
Although economies of scale might represent a relative advantage, Montenegro is using its small size to quickly implement liberal reforms and to partner with other European countries in order to capitalise itself in the regional market. Prime Minister Vujanovic said "We have completely liberalized exports and imports, brought customs services up to EU standards, delivered treasury and public expenditure reforms and entered the economic system with more transparency. There is no turning back" .A USAID consultant observed that he had never seen a more dynamic development program, adding that the people in government are "true reformers". The privatization program has gone into full force, and thanks to a Mass Voucher Privatization (MVP) program last year, Montenegrin citizens became owners in 220 medium sized companies. Yugoslavia's unique system of social ownership - under which everybody effectively owned everything and nothing in the same time - has made privatization in the FRY a more complex affair than other economies in transition.
Who would have thought that a small country like Montenegro would join the Euro? Yet it did just that. After adopting the German Deutsch Mark in 1999, the next logical step was to embrace the European currency and harmonize its system with the European Central Bank. Although the transition to the Euro was not an easy task, the process was a success and Euro notes have found their place in the streets of Podgorica, the capital of Montenegro. The Euro has obliged local citizens to exchange and deposit their savings into banks, and has also encouraged investments in real estate and business development. Much of the Montenegrin economy still relies on heavy industry and the sale of commodities. So now that the country has recovered from the hangover of sanctions and regional isolation, it has to rebuild and reach out. The current administration is therefore implementing a restructuring program through the modernization of local companies to encourage added-value production.
Montenegros advantage is its diversification, through the development of agriculture, tourism and all service industries. A promising industry is food processing and there is also a high potential in the metal processing industry (aluminum, steel and minerals). Another industry with possibilities for development is textiles. Government agencies are eager to attract as many foreign investors as possible. For many of the companies operating in Montengro there appears to be a surplus of employees, but with the state aid there will be a social program for for the retraining of redundant workers. The priority for the Montenegrin economy is to gradually increase foreign investors' confidence while simultaneously stimulating the effort of domestic entrepreneurs by adopting new Company and Labor legislation. Since the collapse of socialism and the troubles of the 90's, Montenegro has suffered from a significant lack of investment. With the rapid realisation of the reforms already undertaken and the enthusiasm for future development - the signs are already evident that Montenegro is set for a period of sustained growth.