Montenegro. Forward-thinking republic enters new era
HAVING DISTANCED THEMSELVES FROM THE MILOSEVIC REGIME, MONTENEGRINS COULD BREAK AWAY FROM THE YUGOSLAV FEDERATION IN A REFERENDUM NEXT YEAR. HOWEVER, THE MAIN CHALLENGE IS TO REVIVE AN AILING ECONOMY

Filip Vujanovic Prime Minister of Montenegro

Perched on the Adriatic coast, the republic of Montenegro, which is slightly smaller than the state of Connecticut and has a population of just under 680,000, partners Serbia in what remains the Yugoslav federation.
Montenegro’s relationship with the federation has been an uneasy one and whether or not the republic will keep its ties to Serbia still remains an open question. President Milo Djukanovic, who came to power in 1997, has pledged to settle the issue by holding a referendum in early 2002.
The likely outcome of such a referendum is, however, in the balance as neither complete independence nor the alternative of remaining in the federal state have clear backing from voters.

Mr. Djukanovic says he is “sincerely and responsibly dedicated to the idea of the restoration of the Montenegrin state,” but has left the door open to entering some form of loose federation with Serbia.
Constitutional questions aside, the other pressing matter on the agenda of Mr. Djukanovic’s government is economic reform. During the past decade, infrastructure and industry crumbled, the banking sector collapsed, tourism dwindled, and corruption became rife.
But the president and his new administration of young technocrats have pledged to reviving the economy by transforming it into a truly free market. Progress has already been made in a number of areas. In November 1999 Montenegro switched to the German mark as its official currency and in January 2002 it will change to the Euro.

Milojika Dakic Governor of the Central Bank of Montenegro

The added stability achieved by the change in currency made possible the establishment of a fully independent central bank in November 2000. Under its Governor Milojika Dakic, the central bank is charged with the task of supervising and regulating the banking sector as well as overseeing its reform and privatization.
Four of the republic’s commercial banks were created after the 1994 banking law and are likely to survive, while the two biggest state banks–Montenegro Banka and Podgorica Banka–are up for sale to strategic investors. It is hoped that the new commercial banking system, together with reforms in the tax system, will provide a more propitious climate for entrepreneurs and investors.

The final ingredient in the reform program is an ambitious privatization plan designed to cut the burden on the state budget and turn loss-making enterprises into more cost-effective operations.
The program involves three distinct strategies. The largest enterprises will be put out to open tender, other companies will be bundled together for batch sales and there will also be room for a mass voucher privatization scheme.
To accompany the privatization program, the government has also undertaken to bring its budget overrun, which is primarily due to larger than anticipated spending on state enterprises, under control and to launch an attack on the grey economy.

INTERNATIONAL OUTLOOK Montenegro is planning for a new era of stability where foreign participation is paramount.

Prime Minister Filip Vujanovic is grateful for the assistance given by the international community, particularly by the United States, in the planning and implementing its reform program.
“We will need continued expert assistance from the U.S. State Department for several years to come. We will also need budget support to cover the deficit that has built up as a result of ten years of neglect and isolation.”
Mr. Vujanovic also stresses that he is looking for U.S. support in encouraging companies to invest in the republic. “Montenegro has lots to offer through the privatization of our companies and investment projects that have potentially large profits.”
One obvious area begging for renewed investment is tourism. With some of the best beaches in the eastern Mediterranean and spectacular mountain scenery close by, it possesses the necessary natural attractions, but investment in hotels and infrastructure is now needed to rejuvenate a sector that could go a long way to giving Montenegro economic independence.