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Montenegro (07/26/10)


July 26, 2010

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For the most current version of this Note, see Background Notes A-Z.

PROFILE

Geography
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.

People
Nationality: Noun--Montenegrin(s); adjective--Montenegrin.
Population (2003 Republic census): 630,548.
Population growth rate (EU 2008 Progress Report): 3.0%.
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 (2008 EU Progress Report): Infant mortality rate--7.5 deaths/1,000 (2008 data). Life expectancy--male 71.2 yrs., female 76.1 yrs. (2008 data).

Government
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, 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.
Administrative divisions (21 municipalities): Andrijevica, Bar, Berane, Bijelo Polje, Budva, Cetinje, Danilovgrad, Herceg Novi, Kolasin, Kotor, Mojkovac, Niksic, Plav, Pljevlja, Pluzine, Podgorica, Rozaje, Savnik, Tivat, Ulcinj, Zabljak.

Economy
GDP (2009): $3.77 billion (€3 billion, at July 2010 exchange rate).
Real GDP growth rate (2009 est.): -7%.
Per capita GDP (2009): $5,655 (€4,500, at July 2010 exchange rate).
Inflation rate (2008): 8.4%.
Natural resources: Bauxite, hydropower, timber.
Tourism: 21% of GDP.
Industry: 13.8% of GDP.
Agriculture: 8.4% of GDP.
Services: 49.6% of GDP.
Trade (2008): Exports--$728.2 million (€565.6 million). Major markets--Italy ($196.1 million; €133.3 million), Serbia ($168.4 million; €114.5 million), Greece ($80.7 million; €54.9 million) Slovenia ($57.1 million, €38.8 million); Kosovo ($55.6 million; €37.8 million). Imports--$2.865 billion (€1.948 billion). Major suppliers--Serbia ($1.119 billion; €761.3 million), Italy ($216.5 million; €147.2 million), Bosnia and Herzegovina ($207.1 million, €140.8 million); Croatia ($201.2 million, €136.8 million), Slovenia ($195.8 million, €133.2 million).

PEOPLE AND HISTORY
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.

GOVERNMENT AND POLITICAL CONDITIONS
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 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 five-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’s new government included several new ministries and ministers.

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. Montenegro's population overwhelmingly supports 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 rule of law issues and a significant disparity in incomes between the 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 coalition had 48 seats in parliament, followed by the SNP (16 seats), NOVA (8), PzP (5), DUA (1), 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--Milo Djukanovic (DPS)
Foreign Minister--Milan Rocen (DPS)
Defense Minister--Boro Vucinic (DPS)
Speaker of the Parliament--Ranko Krivokapic (SDP)

DEFENSE
The Montenegrin Government has established a military and a Ministry of Defense. Further reform and transformation of both institutions is underway. The Montenegrin military operates under the joint authority of the Security and Defense Council, which consists of the president, prime minister, and the speaker of parliament.

Parliament also maintains oversight through its Security and Defense Committee. Montenegro officially entered NATO's Partnership for Peace in November 2006 and in April 2008 was invited to join an Intensified Political Dialogue with the Alliance. On December 4, 2009, the NATO foreign ministers invited Montenegro to participate in the Alliance’s Membership Action Plan (MAP).

ECONOMY
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, which 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.

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%) and Standard & Poors confirmed the long-term (BB+) and short-term (B) credit rating for Montenegro in November 2008. It also confirmed the AAA rating, which concerns the transfer and assessment of convertibility. According to official statistics, the inflation rate in 2008 was 8.4%. More than 90% of capital value in Montenegrin companies had been privatized by July 2010. The banking sector, telecommunications, and oil import and distribution in Montenegro are 100% privately owned. Capital structure analysis shows that the state still has shares in 65 companies, and in 53.8% of those the state has more than 50% ownership. The biggest improvement Montenegro has made has been in the area of tax policy. Montenegro introduced value added tax (VAT) in April 2003, and introduced 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 2008 reached $1.223 billion, which was almost ten times higher than in 2004, and investment per capita in Montenegro is one of the highest in Europe. However, investment has slowed recently, in part as a result of the global economic crisis. According to preliminary data from the Montenegrin Central Bank, the amount of foreign investment in the first quarter of 2009 was $279 million, which represented a decrease of 38% compared with the same period in 2008.

FOREIGN RELATIONS
Since the 2006 declaration of independence, the European Union, Serbia, and all permanent members of the UN Security Council have recognized Montenegro. The UN General Assembly voted on June 28, 2006, to admit Montenegro as a new member state. Montenegro joined the Organization for Security and Cooperation in Europe (OSCE) on June 22, 2006, and the Council of Europe on May 11, 2007.

Montenegro signed a Stabilization and Association Agreement with the EU in October 2007, concluded a World Trade Organization (WTO) bilateral agreement with the EU in April 2008, and was invited to join an Intensified Political Dialogue with NATO at the April 2008 Summit in Bucharest. NATO foreign ministers invited Montenegro to participate in the Alliance’s Membership Action Plan (MAP) on December 4, 2009. On December 15, 2008, Prime Minister Djukanovic formally submitted Montenegro’s application for EU membership to French President Sarkozy, whose country held the rotating EU presidency. On December 9, 2009, in Brussels, Prime Minister Djukanovic submitted Montenegro’s answers to the European Commission (EC) questionnaire, which will be reviewed by the EC before it recommends to member states whether to grant Montenegro candidate status in 2010. As of December 19, 2009, Montenegrin citizens were permitted to travel without a visa to the Schengen area for up to 90 days per six-month period.

U.S.-MONTENEGRO RELATIONS
The United States recognized Montenegro on June 12, 2006, and formally established diplomatic relations on August 15, 2006. The U.S. maintains an Embassy in Podgorica. There are currently a variety of U.S. assistance programs in place in Montenegro to help improve the economic climate and strengthen democracy. These include initiatives to promote local economic growth and business development and to strengthen rule of law and democratic institutions. In order to further develop commercial ties between the United States and Montenegro, the first American Chamber of Commerce (AmCham Montenegro) was launched on November 19, 2008, and as part of the strategic partnership between Montenegro and State of Maryland, the U.S.-Montenegro Business Council was formally opened in Podgorica on December 16, 2008. The Montenegrin military also established a partnership with the Maine Army National Guard, and efforts are underway to broaden this relationship to include cooperation in the civilian sector.

In Washington, President Vujanovic met with Secretary of State Condoleezza Rice in May 2008, and Prime Minister Djukanovic met with Vice President Joseph Biden and Secretary of State Hillary Clinton in January 2010. Deputy Secretary of State James Steinberg traveled to Podgorica in May 2009.

Principal U.S. Embassy Officials
Ambassador--Roderick W. Moore
Deputy Chief of Mission--Bennett Y. Lowenthal
Political-Economic Chief--David Muniz
USAID Officer-in-Charge--Ramsey Day
Public Affairs Officer--Shelly Seaver
Consular Officer--Corey Gonzales
Management Officer--Debra Taylor

The Embassy is located at Ljubljanska bb, 81000 Podgorica. Telephone: +382 20 410 500; Fax: +382 20 241 358. The Embassy website is http://podgorica.usembassy.gov



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