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Report on the Work of the Government of Montenegro 2011

Podgorica, June 2012


Impressum

PUBLICATION Report on the Work of the Government of Montenegro for 2011 The Report was prepared within the Project "Open institutions", implemented by the Center for Democratic Transition (CDT). A Project financed by the European Union through the EU Delegation in Montenegro PRINTING AP Print, Podgorica CIRCULATION 200 copies

OPEN INSTITUTIONS A Project financed by the European Union through the EU Delegation in Montenegro

"This publication has been produced with the assistance of the European Union. It does not contain a formal statement and does not necessarily represent the official position of the European Union."

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Table of Contents FOREWORD..........................................................................................................................................................4 COMPOSITION OF THE GOVERNMENT ......................................................................................................6 SECRETARIAT-GENERAL OF THE GOVERNMENT ....................................................................................12 Introduction ..................................................................................................................................................................................12 The Secretary-General ................................................................................................................................................................13 Internal organization ..................................................................................................................................................................14 Organizational units of the Secretariat-General of the Government ........................................................................14 Activities of organizational units of the Secretariat-General of the Government ..................................................15 CALENDAR 2011 ................................................................................................................................................18 RESULTS IN 2011 ..............................................................................................................................................24 Foreign policy ..............................................................................................................................................................................24 European integration ..........................................................................................................................................................25 Euro-Atlantic integration ....................................................................................................................................................27 Bilateral and multilateral relations ....................................................................................................................................29 Rule of law ....................................................................................................................................................................................30 Institution building ..............................................................................................................................................................30 Judicial reform ......................................................................................................................................................................32 Fight against corruption and organized crime................................................................................................................34 Human rights ........................................................................................................................................................................36 Media freedom......................................................................................................................................................................40 Economy and finances ................................................................................................................................................................42 Fiscal policy and public finances ......................................................................................................................................43 Business environment and financial system....................................................................................................................44 Investments and development ..........................................................................................................................................45 Overview of the most significant international reports................................................................................................50 Structural reforms ........................................................................................................................................................................55 Business sector ......................................................................................................................................................................55 Financial sector ....................................................................................................................................................................56 Labor market ........................................................................................................................................................................57 Sector of agriculture ............................................................................................................................................................57 Administrative reforms........................................................................................................................................................58 Other reform areas ..............................................................................................................................................................58 GOVERNMENT AND THE PUBLIC ................................................................................................................60 Public relations ............................................................................................................................................................................61 Communications with citizens..................................................................................................................................................62 Cooperation with non-governmental organizations ............................................................................................................63 The Office for cooperation with NGOs ..........................................................................................................................65 The Council for cooperation with NGOs ......................................................................................................................66 Free access to information..........................................................................................................................................................67

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Foreword

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he Government of Montenegro, in cooperation with the NGO sector, publishes for the first time a consolidated Annual report on the work of the Government for the previous year.

The Annual report is a summary of the most significant activities that have designated the work of the Government, in accordance with the Work program for 2011. It is our great pleasure that the Report was prepared in cooperation with the NGO Center for Democratic Transition, with which we successfully over the years implement the Project Open Government. This further contributes to increasing transparency of the Government’s work and improving and promoting cooperation with the civil sector. The Annual Report, which is in front of you, represents an experience of modern and Western democracies, while for countries from the region it is a unique experience, so we may say that Montenegro, as a first state that published the Annual report, made an important step forward in transparency policies in the regional context. 4 Report on the Work of the Government of Montenegro - 2011


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We have selected for this Report the most significant activities of the Government, primarily in the field of economy and finance, tourism, human rights, justice, etc., with special emphasis on realization of obligations under European and Euro-Atlantic agenda. The previous year was designated by the process of continued consolidation of public finances, and by adopting the Law on Budget for 2011 we continued with the plan of further fiscal adjustments, which puts us among the few countries to be within the Maastricht criteria. At the same time, this reporting periodwas designated by realization of measures from the Agenda of structural reforms in the field of health, education, labor and social protection, and pension systems.We continued to improve the business environment by reducing barriers in business. We devotedly worked on realization of strategic investments and starting up an investment cycle in the field of tourism, agriculture, energy and industrial production, but also on creating conditions for encouraging new entrepreneurship and job creation, especially for young people. I am pleased to state that 92,53% of the Work program of the Governmentwas realized in 2011. With regard to the work of the General-Secretariat of the Government in 2011, it was to the fullest extent committed to very complex and extensive tasks, whose realization the Government planned in its Work program for 2011, which were predominantly influenced by the fact that Montenegro was granted a candidate status for EU membership. The General-Secretariat of the Government continued during 2011 to strengthen its role, particularly in the field of coordinating program policies and monitoring their implementation.Namely, the General-Secretariat of the Government was an active participant in the process of preparing the Annual work program of the Government for 2011 by, to the extent of its capacities, initiating, coordinating, analyzing and finally, proposing it to the Government, but also regularly monitoring its implementation and submitting quarterly reports to the Government herein. As head of the General-Secretariat of the Government, I am pleased to say that in 2011 the GeneralSecretariat successfully implemented most of the tasks within its competence, with full awareness of the need to further strengthening its capacity, in order to additionally improve the quality of support to be provided to the Government of Montenegro in the decision-making process. Publishing this Report represents just one of the activities undertaken by the Government with a view to allowing simple and direct communication with citizens and itsincreased openness.

Sincerely, Žarko Šturanović, Secretary-General of the Government

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Composition of the Government

I

n 2011, internal and foreign policy of Montenegro was run by the 39th Government of Montenegro, headed by Prime Minister Igor Lukšić.

The 39th Government of Montenegro was elected by the Parliament of Montenegro at its session on 29 December 2010. The Government constituted of Prime Minister, two Deputy Prime Ministers who are also elected ministers and 15 ministers, one of which was without portfolio. 6 Report on the Work of the Government of Montenegro - 2011


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Prime Minister, Dr. IGOR LUKŠIĆ, former Deputy Prime Minister for international economic cooperation, structural reforms and business environment improvement and Minister of finance.

Deputy Prime Minister and Minister of Justice, DUŠKO MARKOVIĆ, former Minister without portfolio.

Deputy Prime Minister and Minister of Information Society and Telecommunications, Prof. Dr. VUJICA LAZOVIC, former Deputy Prime Minister and Minister of Information Society.

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Minister of Foreign Affairs and European Integration, MILAN ROĆEN, former Minister of Foreign Affairs.

Minister of the Interior, IVAN BRAJOVIĆ, former Minister of the Interior and Public Administration.

Minister of Finance, Dr. MILORAD KATNIĆ, former Deputy Minister of Finance for International Economic Cooperation, Structural Reforms and Improving the Business Environment.

Minister of Defense, Mr. BORO VUČINIĆ, former Minister of Defense.

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Minister of Economy, Dr. VLADIMIR KAVARIĆ, former President of the Council of the Insurance Supervision Agency.

Minister of Transport and Maritime Affairs, Prof. Dr. ANDRIJA LOMPAR, former Minister of Transport, Maritime Affairs and Telecommunications.

Minister of Sustainable Development and Tourism, PREDRAG SEKULIĆ, former political director of the Democratic Party of Socialists.

Minister of Agriculture and Rural Development, TARZAN MILOŠEVIĆ, former Mayor of the Municipality of Bijelo Polje.

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Minister of Education and Sports, SLAVOLJUB STIJEPOVIĆ, former Minister of Education and Science.

Minister of Science, Dr. SANJA VLAHOVIĆ, former dean of the Faculty of Tourism at the University "Mediterranean".

Minister of Health, Dr. MIODRAG RADUNOVIĆ, former Minister of Health.

Minister of Labor and Social Welfare, SUAD NUMANOVIĆ, former Minister of Labor and Social Welfare.

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Minister of Culture, Prof. BRANISLAV MIĆUNOVIĆ, former Minister of Culture, Sport and Media.

Minister of Human and Minority Rights, FERHAT DINOŠA, former Minister of Human and Minority Rights.

Minister without portfolio, RAFET HUSOVIĆ, former minister without portfolio.

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Secretariat-General of the Government

INTRODUCTION

T

he Decree on Secretariat-General of the Government of Montenegro determines the Secretariat-General as a service of the Government of Montenegro, which shall perform professional, organizational, administrative and technical tasks for the purpose of the Government, Prime Minister and Deputy Prime Minister, Minister without portfolio and working bodies of the Government.

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Within jurisdiction of the Secretariat-General, among other things, there shall be activities related to preparation of an expert basis for decisions of the Prime Minister in managing and directing operations of the Government, as well as for coordinating work of ministries in terms of providing a single action of the Government. Moreover, the Secretariat-General shall provide technical and organizational assistance to the Prime Minister, Deputy Prime Ministers in their work, as well as technical and administrative assistance in preparing materials, organizing and monitoring sessions and working bodies of the Government and drafting of documents such as minutes, reports and conclusions from the respective sessions. The Secretariat-General shall be responsible for monitoring implementation of acts and conclusions of the Government, implementation of Government’s commitments, as well as responsibilities of the Government to the Parliament of Montenegro. Within jurisdiction of the Secretariat there shall be activities related to coordination of activities and participation in preparing the work program of the Government and monitoring its implementation, cooperation with non-governmental organizations, information technology support to the Government and its working bodies, informing the public on work of the Government, and other activities determined by the respective Decree.

THE SECRETARY-GENERAL

W

ork of the Secretariat-General shall be managed by the Secretary-General of the Government, who shall be appointed and dismissed by the Government at the proposal of the Prime Minister, and who shall be responsible to them. Mandate of the Secretary-General shall be four years. The Secretary-General shall take care of preparation of Government’s sessions, implementation of Government’s acts and other activities in accordance with the decision and Rules of Procedure of the Government, as well as work assigned to him by the Prime Minister. He shall be executor of budget funds allocated for the Government and the Secretariat-General. The SecretaryGeneral shall attend Government’s sessions and shall have the right to participate in work of the Government and, in addition, may be a member of the Government working body. The Secretary-General shall have a Deputy, for whom the same rules on appointment, dismissal, and terms of office shall apply as the ones for the Secretary-General. Moreover, the Secretary-General shall have one or more assistants, who at the proposal of the Secretary-General shall be appointed by

Secretary-General of the Government of Montenegro, ŽARKO ŠTURANOVIĆ.

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the Government for a period of five years and who shall be responsible for management and organization of work in the field of work of the General Secretariat. Finally, the Secretary-General shall have one or more advisors.

INTERNAL ORGANIZATION

I

nternal organization and systematization of organizational units and their scope of work, as well as employment positions, conditions and job descriptions, number of employees and hiring of interns within the Secretariat-General shall be determined by the Rulebook on Internal Organization and Systematization of the Secretariat-General of the Government of Montenegro.

ORGANIZATIONAL UNITS OF THE SECRETARIAT-GENERAL OF THE GOVERNMENT Activities within the scope of work of the Secretariat-General shall be performed within internal organizational units: office, departments, services and other organizational units.

Secretariat-General of the Government Bureau for Communication with Citizens

Prime Minister's Office

Department for Coordination and Monitoring of Government's Policies Implementation

Office of Deputy Prime Minister for political system, internal and foreign policy

Department for Financial and Legal Affairs

Department for General and Legal Affairs and Human Resources

Archive Office

IT Support Section

Office of Deputy Prime Minister for economic policy and financial system

Public Relations Bureau

Minister without portfolio's Office

Office for Cooperation with NGOs

Department for Government Affairs

Air Service

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ACTIVITIES OF ORGANIZATIONAL UNITS OF THE SECRETARIAT-GENERAL OF THE GOVERNMENT Offices of Prime Minister, Deputy Prime Minister for political system, internal and foreign policy, Deputy Prime Minister for economic policy and financial system, and Minister without portfolio perform professional, administrative and other tasks with regard to performance of functions of the Prime Minister, Deputy Prime Ministers and Minister without portfolio. The Bureau for Communication with Citizens shall act within the Prime Minister's Office and shall, among other things, be responsible for acting upon requests of citizens addressing the Prime Minister. The Department for Government Affairs shall perform professional processing of materials submitted to the Government; prepare minutes and conclusions from Government’s sessions; provide technical and administrative support to permanent working bodies of the Government; take care of parliamentary questions, submission of adopted proposals for laws and other acts to the Parliament, amendments and other documents submitted to the Government by the Parliament for its opinion; achieve adequate cooperation and coordination with the Parliament and other bodies; keep appropriate records and perform editing of materials. The IT support Section of the Government shall act within the Department for Government Affairs.

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The Department for Coordination and Monitoring of Government's Policies Implementation shall performs tasks with regard to cooperation and coordination between public administration bodies concerning strategic planning; monitoring the degree of realization of strategic priorities; coordination of activities and participation in preparation of annual work program of the Government, quarterly and annual reports on implementation of the work program and conclusions of the Government. The Department for Financial and Legal Affairs shall, among other things, perform tasks with regard to exercising rights and obligations of employees; free access to information; public procurement; development of human resources; planning the budget for the Secretariat-General; monitoring of regulations in the field of Accounting and Finance, recording and monitoring of financial expenditures; office and typing tasks. Within this Department, the Department of General and Legal Affairs and Human Resources shall operate, which shall perform tasks with regard to exercising rights and obligations of civil servants, employees and elected or assigned persons who exercise these rights in the Secretariat-General; cooperation with the Human Resources Management Authority in terms of educating and improving capacities of employees; evaluation of employees, and other activities within the scope of work of the Secretariat-General. The Archive Office shall perform tasks with regard to reception, recording, administrative and technical processing and storage of materials and archived cases, and other activities within the scope of work of the Secretariat-General. The Public Relations Bureau shall carry out activities with regard to informing the domestic and international public about work and activities of the Government, Prime Minister and Deputy Prime Ministers; presentation of projects and strategic policies; organizing and monitoring conferences and various media activities; improving and coordinating communication and administering Web Portal of the Government. The Office for Cooperation with NGOs shall be engaged in activities with regard to preparation of plans, projects, and improvement of cooperation between the Government and NGOs. The Air service shall be responsible for tasks with regard to the use and operation of aircrafts; organizing, planning and monitoring of planned flights; aircraft maintenance and documents keeping in this field. In accordance with the Rulebook on Internal Organization and Systematization of the SecretariatGeneral of the Government of Montenegro in 2011 there were a total of 98 employees including six trainees at the Secretariat-General.

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Calendar 2011.

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FEBRUARY

JANUARY

MARCH 31 March The Government of Montenegro adopted the Public Administration Reform Strategy 2011-2016, together with the Framework Action Plan for its implementation, which includes specific actions, measures, stakeholders, implementation dynamics, indicators and financial resources required for its implementation.

25 January The Council for Cooperation of the Government and NGOs was constituted, as an independent advisory body. Tasks of the Council, among other things, shall be to monitor implementation of the Strategy for Cooperation between the Government of Montenegro and Non-Governmental Organizations and encourage development of relations and cooperation between the Government and NGOs with a view to improving the quality of life and work of citizens.

17 February The Government of Montenegro adopted the Action Plan for Monitoring Implementation of Recommendations given in EC Opinion.

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APRIL

7 April Web portal of electronic administration - www.eUprava.me was put into operation. This portal shall enable public institutions to provide their services electronically in a simple, transparent and quick manner, and form them according to the needs of users (citizens, business and other institutions). On the other hand, users will easily and safely be able to take advantage of electronic services (eServices) offered by public institutions, to electronically perform their payments (ePayment) and obtain more detailed information, without the need for coming to the counter, going to the bank and etc.

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MAY

JUNE

21 May Montenegro celebrated the fifth anniversary of restoring independence. The Independence Day was celebrated with festivities throughout Montenegro, and on that occasion Prime Minister Igor Lukšić provided solemn reception in Cetinje, which was attended by representatives of executive, legislative and judicial authorities, diplomatic corps, cultural and public employees and other distinguished guests.

3 June The Government of Montenegro adopted the Proposal for amending the Constitution with regard to the judiciary, which was passed by the Parliament of Montenegro at its session on 7 July. The procedure of constitutional amendments has been initiated with a view of creating an independent, responsible and professional merit-based judicial system, in accordance with European standards.

22 May Inaugural Conference "Balkan initiative to strengthen the society of Southeast Europe" was held in Budva, sponsored by the Government of Montenegro and the Atlas Foundation, in partnership with the Clinton Global Initiative. The main presentation was given by Bill Clinton, 42th President of the United States. In the introductory part of the Conference participants were addressed by the Prime Minister of Montenegro Igor Lukšić.

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AUGUST

JULY 7 July Affirming the principles of openness and maximal transparency of work, the Government adopted the Decision on Publishing Materials from Government’s Sessions, in order to enable the public concerned with faster access to documents of general interest within its jurisdiction.

SEPTEMBER 20 September Montenegro joined at the invitation of the United States a global initiative „Open Government Partnership'' (OGP).

28 July The Government of Montenegro adopted the Decision on Establishing the Council for Protection against Discrimination, headed by the Prime Minister. The Council members shall be competent ministers and six representatives of NGOs dealing with human and minority rights protection and promotion, protection against discrimination by sexual orientation, as well as protection against discrimination in the area of education and labor.

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OCTOBER

NOVEMBER

DECEMBER

13 October European Commissioner Štefan Füle presented to Prime Minister Igor Lukšić the Annual Progress Report on Montenegro for 2011. Commissioner Füle congratulated the country on progress in European integration.

2 November Montenegro became a member of the Executive Board of UNESCO for the period 2012 - 2015, on elections held during the 36th session of the General Conference of UNESCO in Paris.

9 December Heads of state and government of the EU accepted at the summit in Brussels on 9 December 2011 recommendations of the Commission dated 12 October with a view to opening negotiations with Montenegro in June 2012. They obliged the Council to review progress in implementing reforms with special focus on rule of law and fundamental rights, particularly in fight against corruption and organized crime, according to the report of the Commission which will be presented in the first half of 2012.

18 November The Free Trade Agreement (FTA) and the bilateral Agreement with Ukraine were signed in Kiev within negotiations for membership of Montenegro in the WTO.

17 December At the VIII meeting of the Ministerial Conference in Geneva, the Protocol on the Accession of Montenegro to the World Trade Organization (WTO) was signed.

18 October The second cycle of the MAP for the period 2011-2012 officially started, after the presentation of second ANP, which contains an overview of objectives and activities for that period, drafted on the basis of conclusions on implementation of the previous ANP, priorities for the future and a parallel and complementary process of European integration.

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Results in 2011

FOREIGN POLICY

C

ontinued implementation of policies with the priorities of European and Euro-Atlantic integration, and strengthening regional cooperation and good neighborly relations, were the Government's foreign policy priorities in 2011. 24 Report on the Work of the Government of Montenegro - 2011


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EUROPEAN INTEGRATION Central activity of the Government of Montenegro in 2011 was focused on realization of the seven key priorities in the EC Opinion, and obtaining a positive opinion and recommendations of the EC to open accession negotiations with Montenegro, and acceptance of recommendations by the European Council. In highly complex economic and financial circumstances, as well as political processes in Europe and the world, in which the policy of enlargement was often placed in the background, Montenegro has made a positive result and ensured progress and continuation of European integration without delay. Decision of the European Council of 17 December 2010 to approve candidate status to Montenegro has been widely welcomed and represented an additional incentive for broad mobilization of internal resources to meet the key priorities. On the same day, the Government adopted a draft action plan for implementing recommendations given in EC Opinion. At the same time, the Parliament of Montenegro submitted the Action Plan for Strengthening its Legislative and Supervisory Role, which is integrated into a single draft document. The Draft Action Plan was immediately published on the Government’s website and submitted to the Commission for comments and suggestions. The Government of Montenegro adopted on 17 February 2011 the Action Plan for Monitoring Implementation of Recommendations given in EC Opinion, after an extensive internal debate, attended by all structures of society and intensive consultations with the European Commission. At the same time, the Parliament of Montenegro submitted the Action Plan for Strengthening its Legislative and Supervisory Role, which is integrated into a single document. The commitment of this mechanism was to ensure a good choice and order of priorities, to put an emphasis on key measures, in order to have concrete and positive changes and to have them substantially aligned with EU standards. The Action Plan defined 60 priorities and 150 activities, which constituted a kind of benchmark for their achievement, whereby most of the activities had a number of sub-activities. In accordance with the Action Plan, at the proposal of the Government, the Parliament passed a large number of laws, for which by-laws are being drafted, with a view to improving implementation of measures determined by the Action Plans. Continuous work was performed on implementing the strategies adopted, with regard to the scope of those Action Plans. Moreover, the Government continuously, with the help of local and foreign experts, conducted trainings and organized seminars, with a view to better training of personnel for implementation of new laws. In assessing the achieved, one should bear in mind the qualitative dimension of drafting legislation and policy documents, because they were draftedin almost constant consultations with experts from the EU, the European Commission, the Venice Commission, the Sigma, and were subject to their numerous analysis. One of the key challenges was to maintain a balance between the defined deadlines and quality of regulations, in order to ensure their compliance with EU standards. Of course, the best laws in themselves do not guarantee success. Their consistent and efficient implementation is the true measure of success. Therefore, after adoption of legislative, strategic, and institutional framework the emphasis was put on implementation. 25 Report on the Work of the Government of Montenegro - 2011


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"Montenegro has successfully confronted priorities defined by the EU in 2010 as a precondition for opening accession negotiations. The country has consolidated national consensus on the issue of European integration. As for progress achieved, the Commission considers that Montenegro has achieved the required level of compliance with the criteria for membership, in particular the Copenhagen political criteria. However, maintaining the momentum of reforms is still essential, especially with regard to implementation of legislation and policies in the field of rule of law. For this purpose, the Commission intends in the Montenegrin case, to propose implementation of a new approach to negotiating chapters Judiciary and fundamental human rights and Justice, freedom, security. In light of these facts, and taking into account the Council conclusions of December 2010, the Commission recommended opening accession negotiations with Montenegro''.

Annual Progress Report 2011

Heads of state and government of the EU accepted at the summit in Brussels on 9 December 2011 recommendations of the Commission dated 12 October and with a view to opening negotiations with Montenegro in June 2012 obliged the Council to review progress in implementing reforms with special focus on rule of law and fundamental rights, particularly in fight against corruption and organized crime, according to the report of the Commission which will be presented in the first half of 2012. The Council appealed to the Commission to promptly present the draft negotiating framework for Montenegro in accordance with its conclusions of December 2006 and established practices, including the new approach proposed by the Commission for chapters on Judiciary and fundamental rights, and Justice, freedom and security, i.e., chapters 23 and 24. The Council also appealed to the Commission to initiate a process of in-depth analysis of the EU acquis with Montenegro in these areas.

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Decision of the European Council verifies good progress in reforms that Montenegro has achieved alltogether, especially in the seven key priorities and represents in fact a green light for opening accession negotiations. This is a fairly big success for which the Government and the Parliament, NGOs, media, civil society as a whole were responsible. Recommendation of the European Commission and a unanimous decision by the Heads of state and government of 9 December 2011, giving Montenegro the green light to a near start of negotiations for EU membership, represents a breakpoint on the road to full EU membership. This is because negotiations are the most complex and most challenging phase of the integration process, which most directly and comprehensively contribute to transformation of the entire system, and essentially educate and change the culture of reconsideration and acting. This further emphasizes the importance of involvement and active relation of all actors in society. There is no doubt that Montenegro is on the threshold of membership negotiations. However, this is just the beginning of a new phase of our European way, with a much higher degree of sensitivity and responsibility for future tasks in reforming the entire system.

EURO-ATLANTIC INTEGRATION During 2011 Montenegro successfully continued the process of approaching NATO by fulfilling demanding commitments of the Euro-Atlantic integration process. Cooperation between Montenegro and NATO took place within the framework of the Partnership for Peace Pf P or the Membership Action Plan MAP, through implementation of activities under the Annual National Program (ANP) in the MAP and defense-military cooperation programs: the Individual Partnership Program (IPP) and the Planning and Review Process (PARP). In 2011, Montenegro successfully completed the first cycle of MAP and started the second. Montenegro continued to contribute to global peace and security through active participation in regional initiatives, the ISAF mission in Afghanistan and other international missions. Montenegro was admitted to the Membership Action Plan - MAP in December 2009. The MAP is the most important phase of the European integration process, since it represents the last step before full membership in the Alliance. During 2011, Montenegro has successfully completed the first cycle of the MAP, with a positive evaluation at the meeting of the NAC (North Atlantic Council) and Montenegro, which was held on 27 June in Brussels, where they judged the results of implementation of priorities from the basic document of MAP - the Annual National Program (ANP). The second cycle of the MAP for the period 2011-2012 officially commenced on 18 October in Brussels, after the presentation of second ANP,

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which contains an overview of planned objectives and activities necessary to implement reforms in the areas defined for the specified period, drafted on the basis of clear strategic priorities of Montenegro. In 2011 Montenegro continued to be involved in the Partnership for Peace program, to which it was received in 2006. During this year, further active policy of Montenegro in the MAP process was promoted and intensive diplomatic activity was continued to strengthen cooperation with partner countries of NATO and Partnership for Peace-Pf P. In this context, highly important was the cooperation with neighboring regions and countries that are members of the Alliance, and cooperation with NATO Contact Point Embassy in Montenegro (Slovenia 2011-2012). During this year, Montenegro continued very significant and beneficial cooperation with NATO within the framework of the Science for Peace program, primarily on the GEPSUS project, whose main objective is to strengthen national capacities to counter natural and other disasters. Within this project, it is scheduled to open the Center for simulation of natural disasters within the Ministry of Defense for training military personnel and staff of the Department for Emergency Situations (MI MNE) and the Training Laboratory for software simulation of natural disasters at the University of Montenegro (for different target groups: citizens, students, pupils, representatives of municipal institutions for protection, environmental protection agencies, etc.).

A5 In the first half of 2011, Montenegro presided over the US-Adriatic Charter (A5), the most important regional security mechanism, which encourages close cooperation and coordination of member states on issues of defense-security cooperation and NATO integration. During the Montenegrin presidency over A5, the initiative was finalized to deploy regional instructors in the Afghan Military Police School in Cabul, and at the final ministerial meeting under the presidency of Montenegro NATO Secretary General Anders Fogh Rasmussen has participated.

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In 2011 Montenegro actively participated in the ISAF mission in Afghanistan. After successful previous rotations and performed tasks, fourth contingent of 39 Montenegrin soldiers was distributed in Afghanistan in August 2011. Two team members are part of the A5 team of instructors deployed in the Afghan Military Police School in Cabul. The remaining 37 members are located in the Regional Command West under German command at two sites (3 Staff Officer in Mazar-i-Sharif, Balkh Province and 34 members in the Pannonia base in Pol-e-Komri, Baghlan Province). Recognizing the need to continue to promote awareness of citizens about the Alliance and build support for membership of the country in NATO Montenegro continued during 2011as well, to implement the Communication Strategy on Euro-Atlantic Integration.

BILATERAL AND MULTILATERAL RELATIONS Regional, European and transatlantic agenda in foreign policy of Montenegro determines the framework of bilateral cooperation. Numerous meetings at the highest level, political consultations, initiated and concluded bilateral agreements, economic meetings and other activities reflect the fact that Montenegro is now an important regional, European and international partner. By successfully implementing many projects financed through funds for bilateral development and assistance in reforms, Montenegro, apart from creating the necessary preconditions for successful continuation of the European integration process, deserved the confidence of European partners proving to be profitable "investment" of their taxpayers, which is of particular importance in times of economic crisis.

Establishment of Diplomatic Relations During 2011 diplomatic relations were established with the following countries: Antigua and Barbuda (11 April), Benin (15 September), Burkina Faso (20 December), Dominica (25 February), Djibouti (6 October), Ethiopia (10 June), Guyana (21 September), South Sudan (21 November), Kenya (6 October), Comoros (9 February), Congo (1 February), Malawi (16 September), Nauru (25 January), Nepal (18 July), Saudi Arabia (16 September), Sri Lanka (4 April), Trinidad and Tobago (15 April) and Uganda (14 July).

During 2011 Montenegro demonstrated maturity and ability to assume an important role in the region, when it comes to cooperation at the regional and multilateral level. Montenegro, as a full member, actively participated in work of the United Nations (UN), the Council of Europe (CoE), the Organization for Security and Cooperation in Europe (OSCE) and other relevant international organizations and institutions. Moreover, Montenegro successfully finalized presidency over major regional initiatives: the Adriatic-Ionian Initiative (AII) and the Southeast Europe Cooperation Process (SEECP), for which it received recognition from major international addresses. Presidencies were estimated as being successful and constructive, and Montenegro confirmed as a reliable, responsible and committed partner, ready to adequately respond to various political challenges.

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In January 2011 the CoE Office in Podgorica was closed, so did the existing system of monitoring obligations that Montenegro undertook by joining the CoE, which represents recognition for achievements and progress made in comprehensive reform processes of our society.

Active regional cooperation and good neighborly relations based on mutual respect and equality are the pillars supporting the Montenegrin foreign policy. Montenegro, by consistent promotion of good neighborly relations, provided their citizens breathable boundaries with free flow of people, goods, services and capital. In this manner, from the earliest phases of European integration, we were among the first to demonstrate understanding of importance of regional approach and good neighborly relations in finding solutions to challenges that Western Balkans is facing, as well as evaluation of its development potentials. Driven by the awareness of opportunities and needs for further improvement of relations, we made the respective practice more dynamic in political and administrative terms during 2011 as well. The lack of open issues in relations with neighbors enables putting the foreign policy, to the fullest extent, in function of democratization, further development and strengthening of security at the national level.

RULE OF LAW INSTITUTION BUILDING In 2011 numerous activities were carried out on completing the legislative framework, with a view to establishing a depoliticized, efficient and professional merit based public service. On 31 March 2011, the Government adopted the Public Administration Reform Strategy 2011 2016, with the Framework Action Plan for its implementation. The key goals of the Strategy are the following: increasing levels of transparency and ethics in public administration; institutional stability, functionality and flexibility of public administration system; improving the business environment while improving quality of public services and reducing the administrative burden; integration of Montenegro’s public administration in the European Administrative Space. On 15 April 2011, the Parliament at proposal of the government passed the Law on Amendments to the Law on Internal Financial Control System in the Public Sector. The Law establishes the obligation of providing an annual report on financial management system, control and internal audit activities to the Ministry of Finance. In order to ensure full independence in relation to executive power, exempt from this obligation are the following: the State Audit Office, the Parliament of Montenegro, the Constitutional Court, judicial authorities and the State Prosecutor’s Office, the Protector of human rights and freedoms, independent regulatory bodies, joint stock companies and other legal entities in which the state or municipalities has a majority ownership stake.

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In July 2011, the Law on Amendments to the Law on Public Administration was adopted. The stipulated solution refers to rationalization of the existing organization of public administration in terms of the structure of bodies, tasks they perform and their mutual relations, as well as improving the system of accountability and the framework for implementation of long-term reform plans. It also creates conditions for effective participation of non-governmental sector and citizens in general in decision-making process of public administration bodies by regulating the legal basis for passing bylaws that will regulate this issue.

On 22 July 2011, the Parliament at proposal of the government passed the Law on Civil Servants and Employees, which shall: improve quality, politically neutral and professional work of employees in public administration; ensure transparency and merit-based appointment and promotion; define professional development and legal status of employees in public administration bodies; stipulate obligation of adopting integrity plans in the public sector; improve the institute of protection of persons reporting suspicion of corruption (whistleblowers). The Law shall apply from 1 January 2013, in order to ensure, in the meantime, all preconditions for its effective implementation.

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In November 2011, the Law on Territorial Organization of Montenegro was adopted. Having in mind that local self-government reform substantially changes organization and jurisdiction of local self-government units and bodies in order to more easily and efficiently service the needs of local people, it was necessary to pass a new Law on Territorial Organization of Montenegro with a view to recognizing specifics of local self-governments that essentially changed its characteristics from adoption of the previous Law from 1960. According to the new Law Montenegro is territorially organized in 19 municipalities, the Capital Podgorica and the Old Royal Capital Cetinje. This territorial organization represents expression of the achieved level of development of Montenegrin society. By the Law on Territorial Organization of Montenegro the existing territorial division of Montenegro is retained, but the conditions and procedures of territorial changes and other issues of importance to territorial organization are fully determined.

JUDICIAL REFORM In 2011, in accordance with recommendations of the European Commission, activities on judicial reform were intensified, by initiating amendments to the Constitution and legislation, with a view to strengthening independence of the judiciary and prosecutors from political influence. This regulatory framework shall ensure conditions for independence, accountability and efficiency of the judiciary, and merit based system for appointing and promotion, with clear and professional criteria for appointment and promotion of judges, as well as clear procedures for strengthening the accountability of the judiciary and disciplinary sanctions. The Government of Montenegro at its session on 3 June 2011 adopted the Proposal for Amendments to the Constitution with regard to the judiciary, which the Parliament of Montenegro passed at its session on 7 July. The procedure of constitutional amendments was initiated with a view to creating independent, responsible and professional merit-based judicial system, in accordance with European standards.

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During drafting of the Proposal for Amendments to the Constitution, the Government, apart from the EC Opinion on Montenegro's application for EU membership, considered a number of documents, the most important of which are the following: the Venice Commission Opinion on the Constitution of Montenegro, the Venice Commission Opinion on Draft Amendments to the Constitution Montenegro, the Progress Report of the European Commission for 2008 and 2009, and expertise obtained through IPA 2007 project "Judicial Reform", reports of independent experts of the European Commission made during TAIEX monitoring missions, as well as reports of the Council of Europe monitoring mission. The Government’s Proposal for amending the Constitution includes changes of composition of the Judicial Council, election of the president of the Supreme Court, jurisdictions of the Parliament at election and release from duty of President of the Supreme Court, Supreme Public Prosecutor, public prosecutors and Prosecutorial Council, as well as jurisdictions for election and release from duty of President and judges of the Constitutional Court. Moreover, the Constitution shall regulate composition of the Prosecutorial Council. Changes shall include composition and election of judges and President of the Constitutional Court and decision-making in the Council of three judges when the Constitutional Court decides on constitutional complaints with a view to more efficient processing. The Government has proposed that changes to the Constitution in terms of constitutional judiciary reform shall be in terms of increasing the number of judges of the Constitutional Court, as well as entrusting election of judges to three branches of government and president of the state. Competent committee of the Parliament passed the Draft amendments to the Constitution on the basis of the respective proposed solutions of the Government for amending the Constitution in relation to the judiciary, the Public Prosecutor's Office and the Constitutional Court and the opinion obtained by the Venice Commission. Members of the Parliament of Montenegro passed the Draft on the extraordinary session on 28 September 2011. On 22 July 2011, the Parliament at proposal of the government passed the Law on Amendments to the Law on State Prosecutor's Office, the Law on Amendments to the Law on Judicial Council and the Law on Amendments to the Law on Courts. Amendments to the Law on State Prosecutor's Office refer to the election procedure of deputy state prosecutors, special prosecutor and deputy special prosecutor, review of established criteria for election and their objective evaluation on the basis of sub-criteria, disciplinary liability and release from duty, as well as reducing concentration of powers of the Supreme Public Prosecutor. These amendments shall provide realization of personal and institutional independence of the State Prosecutor's Office, as one of the key objectives of judicial reform. Amendments to the Law on Judicial Council promote the system of electing members from among the judges and prominent lawyers, determine the procedure for nominating candidates for electing President of the Supreme Court, and revise the election criteria. The system of objective evaluation, disciplinary measures and procedures is determined as well. Stipulated novelties shall contribute to further strengthening the rule of law, by depoliticized and criteria based election of members for the Judicial Council, as well as improved independence, autonomy, efficiency and accountability of judges. 33 Report on the Work of the Government of Montenegro - 2011


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Amendments to the Law on Courts includes more precise definition of disciplinary offenses and disciplinary measures, as well as defining improper and negligent performance of judges, as grounds for their release from duty. According to new legislation, the Judicial Council and the Prosecutorial Council formed disciplinary committees, as well as committees for monitoring compliance with the Code of Ethics for judges and prosecutors. Moreover, the Rules of Procedure of the Judicial Council and the Rules of Procedure of the Prosecutorial Council were adopted. Applying the new Law on the Judicial Council, significant changes were made in composition of a new disciplinary commission, and commission for its election - newly formed commissions for testing, no more consisting of the president of the Judicial Council and a member of any committee. Announcing vacancies for election of candidates takes place according to the new procedure as well. The Commission for monitoring compliance with the Code of Ethics held its first meeting and acted on two submitted applications. According to the Law on Amendments to the Law on State Prosecutor's Office, the Rules of Procedure of the Prosecutorial Council, criteria and sub criteria shall be determined for the first appointment of a deputy prosecutor, appointment of a deputy prosecutor who progresses, appointment of a Public Prosecutor and evaluation of candidates.

FIGHT AGAINST CORRUPTION AND ORGANIZED CRIME Activities were intensified on improving legal, strategic and institutional framework for fighting corruption and organized crime. Investigative capacities and cooperation between law enforcement agencies were enhanced. Methodology of work of the National Commission for Implementation of the Strategy for fighting organized crime and corruption was improved, by amending its Rules of Procedure, and introducing novelties, such as transparency of the National Commission –with a view to improving preventive function of the Commission in preventing corruption and organized crime; mechanism of appealing representatives of state authorities indicated in terms of risk of corruption on thematic sessions of the National Commission, in order to emphasize potential risks and improve mechanisms for prevention of corruption in their bodies; ability of the National Commission to act on petitions from citizens concerning the field of organized crime and corruption. 34 Report on the Work of the Government of Montenegro - 2011


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The National Commission unanimously adopted on 4 July 2011 the Proposal for the renewed Action Plan 2011-2012 for Implementation of the Strategy for fighting corruption and organized crime, in accordance with Recommendations given in EC Opinion. The Government adopted the renewed Action Plan on 21 July 2011. The new Criminal Procedure Code, which is fully applicable since 26 August 2010, introduced a new concept regarding investigation and effective investigative mechanisms for fighting corruption –in criminal offenses of corruption special investigative techniques and specific measures of secret surveillance shall apply. The Code introduced procedural novelties for effective confiscation of gain obtained by criminal activities, and amendments to the Criminal Code prescribe substantive provisions that are the basis for temporary and permanent confiscation of property gain. Current implementation of the new Criminal Procedure Code indicates that prosecutorial investigation is more efficient, faster and better than judicial investigation and that prosecutors are able to provide a leadership role in inspection and investigation, because they directly manage and direct work of the police and other state bodies in taking certain investigative activities.

Special investigation team In addition to the Department for fighting organized crime, corruption, terrorism and war crimes, managed by the Special Prosecutor, the Special investigation team was formed, as a specialized multi-disciplinary, multi-institutional unit created to proactively target organized crime and corruption. This body is composed of representatives of the Police Administration, the Administration for Prevention of Money Laundering and Terrorism Financing, the Department of Public Revenues and the Customs Administration, who are responsible for their work to the Special Prosecutor. This team is assigned cases that require investigators ready to shed light on the most complex cases of organized crime and corruption and able to conduct financial investigations.

New set of anti-corruption laws was adopted: Law on Amendments to the Criminal Code, where GRECO recommendations from the Third Round Evaluation were implemented (active and passive bribery, trading in influence); Law on Civil Servants and Employees, which stipulates obligation of adopting integrity plans in the public sector and improved institute of protection of persons reporting corruption; Law on Amendments to the Law on Prevention of Conflict of Interest, Law on Financing of Political Parties and Law on Public Procurement. In November 2011, the Law on Lobbying was adopted, which for the first time normatively regulates lobbying activities in Montenegro and completes anti-corruption legal framework at the national level. Provisions of the new law determine lobbying activity, with clear rules of control. Normatively regulated lobbying activities as legitimate and desirable form of influence on decision-making process that are of interest to the community, will provide full transparency of the process, which prevents illegal lobbying activity. According to legislation, lobbyists must have a certificate for performing their work. In the field of fighting organized crime, the Government adopted the Strategy of Development and Functioning of the Police 2011-2013, together with the Action Plan for its implementation, which defines strategic priorities and objectives, and measures for establishing a modern and efficient organization, modernization and development of the police in all fields of work. 35 Report on the Work of the Government of Montenegro - 2011


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Reporting corruption In 2011, 12 institutions with open phone lines and otherwise receive notification of corruption received a total of 223 applications. The Anti-Corruption Initiative Administration received 132 applications, 121 of which were forwarded to other competent authorities, and in 11 cases legal advice was provided. The Police Administration received 40 applications, while the Customs Administration received 22. The Ministry of Health, during the reporting period, received 19 applications and the Supreme State Prosecutor's Office received 10. On the basis of all submitted applications in 2011, six disciplinary proceedings were conducted, three of which resulted in adjucated disciplinary penalty. On the basis of the submitted applications, 17 criminal charges were filed, according to which 9 criminal proceedings were initiated and 33 applications have been rejected as unfounded. Three final judgments were taken. Other applications are under review, i.e. process of collecting and processing data.

The Police Administration, in cooperation with other security structures, based on the collected operational data, created the Map of Organized Crime in Montenegro, with data on the most significant organized crime groups and their members. Within the IPA 2010 twining project ''Intelligence-led Policing", which was successfully implemented in cooperation with the Criminal Intelligence Service Austria, the Organized Crime Threat Assessment in Montenegro was elaborated, which completed activities on development of this strategic framework, according to the standards of EU OCTA. With a view to centralizing and unifying the entire international police cooperation, through formation of the International Police Cooperation Unit (ILECU), the proposal for reorganization of the NCB INTERPOL was prepared. The newly formed ILECU unit within the Crime Police Sector shall encompass current operational cooperation through Interpol, Europol, SIREN, FRONTEX, the SECI Center, foreign liaison officers and other services.

HUMAN RIGHTS In the field of human rights in 2011 activities were continuously undertaken in promoting effective implementation and anti-discrimination legal framework and policies, as well as improving strategic and institutional framework. On 30 June 2011, the Government adopted the Strategy for Protection against Domestic Violence for the period 2011-2015, in whose development participated representatives of NGOs dealing with issues of protection against domestic violence, while representatives of the UNICEF, UNDP and OSCE provided expert support. The Information/analysis on Representation of Minority People and other Minority Ethnic Communities in public services, bodies of public administration and local self-government, with the proposed measures was adopted. 36 Report on the Work of the Government of Montenegro - 2011


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On 28 July 2011, the Government adopted the Decision on Establishing the Council for Protection against Discrimination, headed by the Prime Minister. The Council members shall be competent ministers and six representatives of NGOs dealing with human and minority rights protection and promotion, protection against discrimination by sexual orientation, as well as protection against discrimination in the area of education and labor. The Council shall adopt a program document for fight against discrimination, which shall include protection of rights of persons with disabilities, victims of domestic violence, members of LGBT and RAE population. Advisor for anti-discrimination issues was appointed in the Prime Minister's Office. Considering activities on effective implementation of the Law against Discrimination, in May 2011, the Rulebook on the content and manner of keeping records of all discrimination cases was adopted, which prescribes the content and manner of keeping records on cases relating to discrimination in courts, inspection bodies and misdemeanor authorities. Records shall be electronically-driven databases, allowing direct access to data to the Protector of human rights and freedoms of Montenegro. The data in the records shall be systematized and managed in the form of a registry. In line with commitment of the Government to continuously work on promotion and recognition antidiscrimination policy in Montenegro, and influence through concrete measures on improving protection of human rights and freedoms, and make the Montenegrin social environment more tolerant, the activities were undertaken to establish institutional and program cooperation between the Government and NGOs in order to strengthen anti-discrimination system for LGBT population members. Montenegro was chosen to be the first beneficiary country of the Council of Europe's project, "Fight against discrimination on the grounds of sexual orientation and gender identity", with an explanation that our country is truly and permanently dedicated to solving the problem of discrimination against LGBT persons, which is recognized throughout Europe. The project includes a range of activities for raising awareness among policy and decision-makers, judicial structures and state institutions and authorities on banning discrimination against LGBT persons. 37 Report on the Work of the Government of Montenegro - 2011


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On 2-3 September 2011, the Government organized an international conference "Towards Europe, towards equality", in cooperation with the International Academic Conference "Justice in the Balkans, equality for sexual minorities," the Williams Institute of Law, the University of California, Department of Sociology, University of Lund in Sweden and the European Commission for Sexual Orientation Law under the auspices of the Embassy of the Kingdom of Netherlands. This is the first conference dedicated to the topic, hosted by one government in the Western Balkans region. Experts in the field of human rights from EU, US, Canada participated, and trainings in the framework of the conference were attended by members of the police, prosecutors, representatives of the Ministry of Justice and other public agencies.

Activities were continued on implementation of the Action Plan for implementation of the Strategy for Integration of Persons with Disabilities in Montenegro for 2010-2011. The network of daycare centers for children with disabilities was expanded. In addition, consultations were conducted with several municipalities for providing land for construction of "group homes for children with disabilities." In order to strengthen public awareness of the needs of persons with disabilities and children with disabilities, the campaign, "We are talking about the possibilities" was continued. Programs in the field of inclusive education were continuously conducted and opening of stimulating rooms in elementary schools. During the last year stimulating rooms/inclusive workshops were opened in five elementary schools. Activities were intensified on further improvement of the legal framework and equal opportunities for women. The Law on Amendments to the Law on Labor prescribes equal pay for men and women for equal work or work of equal value which is realized with the employer. Within electoral law, it is stipulated that every third candidate on the list of candidates shall be a woman. The situation is improved in terms of social inclusion of RAE population. On 28 April 2011, the workshop on "Social inclusion of Roma" was organized in Podgorica by the European Commission and the Government of Montenegro. In accordance with operational conclusions from the workshop, activities were realized in the following areas: civil registration; education; employment; social and health care; housing issues. Amendments to the Law on Citizenship extended deadlines for submitting applications for acquiring Montenegrin citizenship by reception at easier conditions. Amendments to the Law on Identity Cards extended the validity of old ID cards until the expiration date and no later than 31 July 2012. The Law on Amendments to the Law on Montenegrin Citizenship provides a solution for citizens who experience difficulties in obtaining a release from other nationalities. A citizen of the former Socialist Federative Republic of Yugoslavia with a registered permanent residence in Montenegro for at least two years before 3 June 2006 and identification card issued in accordance with law on identity card which was in force at the time of issue, may acquire Montenegrin citizenship if until the application he/she has not checked out the residence in Montenegro and if he/she fulfills other conditions provided for by law. Application for admission to the Montenegrin citizenship may be submitted to the competent authority by 31 January 2012. 38 Report on the Work of the Government of Montenegro - 2011


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Montenegro provides financial assistance to persons of RAE population in covering the cost of administrative fees for obtaining release from former citizenship. Funds are paid to the Roma National Council. These funds are opting out of funds for implementation of the Strategy for Improving Position of RAE Population. In 2010, the amount of â‚Ź 85,000 was allocated, and in 2011 the amount of â‚Ź 90,000. In 2011, legislative framework for protection of human rights was significantly improved by adopting the Law on Protector of Human Rights and Freedoms, the Law against Discrimination of Persons with Disabilities, the Law on Free Legal Aid, the Law on Amendments to the Law on Vocational Rehabilitation and Employment of Persons with Disabilities.

Draft Law on the Protector of Human Rights and Freedoms was adopted by the Government of Montenegro on its session on 17 March 2011, and the Law was passed by the Montenegrin Parliament on 29 July 2011. The Protector is defined as a national mechanism for prevention of torture and other forms of inhuman treatment or punishment. Moreover, given the commitment to designate the Protector as a mechanism for prevention and protection against discrimination, the new law defined this issue. The new Law increases the number of Deputy Protectors, and specifies specialties of Deputy's action in the area of protection of persons deprived of their liberty, protection of rights of minority peoples and other minority ethnic communities, protection of children's rights, protection of gender equality, protection of persons with disabilities and protection against discrimination. By establishing new provisions on the Protector of Human Rights and Freedoms the independence and autonomy in work of the Protector's Office was strengthened through higher financial support, capacity building of the Offices and powers and security of employees. This institution submitted to the Parliament four special reports: Report on the state of indemnification of property rights and compensation; Report on the state of human rights of mentally ill persons placed in institutions; Report on the state of rooms of the police to hold persons deprived of their liberty, and Report on protection against discrimination in first half of 2011. The Ministry of Justice, the Institute for execution of criminal sanctions and the NGO "Action for Human Rights" concluded the Agreement on cooperation in the project "Monitoring respect for human rights in closed institutions in Montenegro." 39 Report on the Work of the Government of Montenegro - 2011


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In July 2011 the Parliament passed the Law on Prohibition of Discrimination against Persons with Disabilities, which prohibits discrimination against persons with disabilities in proceedings before authorities, in utilizing structure and areas in public use, in delivering public services, in public transport, in the areas of healthcare, formation and education, employment, labor, social and child welfare, marital and family relations, in exercising the right to vote, in non-governmental organizations and against nongovernmental organizations for protection of persons with disabilities. The Law regulates forms of discrimination - direct and indirect discrimination, as well as the possibility of introducing measures of affirmative action aimed at social inclusion of persons with disabilities. According to the new Law on Free Legal Aid, free legal aid shall include legal counseling, preparation of pleadings, and representation in proceedings before a court, the State Prosecutor's office, the Constitutional Court of Montenegro or in a procedure of extrajudicial dispute settlement. Montenegrin citizens, stateless persons who are lawfully present in Montenegro, asylum seekers, foreigners with permanent residence and all other persons lawfully residing in Montenegro, and users of financial aid for the family or enjoy any other right of social protection may use free legal aid. Free legal aid may be used by children without parental care, persons with disabilities, victims of domestic violence and persons with low income. The Law establishes a structured and organized system of providing free legal aid that is sustainable and consistent with international standards in this area. In 2011, the Law on Amendments to the Law on Vocational Rehabilitation and Employment of Persons with Disabilities was passed, which broadened the term of employer to public administration bodies and public administration, public institutions, judicial bodies, funds, agencies and other organizations funded from the Budget. It also promotes employment of persons with disabilities and their integration into the labor market in line with their remaining working ability. Measures and activities of vocational rehabilitation in accordance with the prescribed standards in this area are more precisely defined. A new institute of social inclusion of persons with disabilities was introduced. The novelty is that associations of persons with disabilities, when they appear as employers, shall be relieved from the obligation to pay special contributions, and have the right on a wage subsidy for hiring persons with disabilities. Purpose of using resources of the Fund for vocational rehabilitation was expanded by introducing a grant scheme or grant programs to be obtained through public calls and serve for financing projects of vocational rehabilitation and employment of persons with disabilities.

MEDIA FREEDOM In the area of media freedom in 2011 activities were undertaken in order to full decriminalization of defamation and limit the amount of monetary compensations against journalists in civil proceedings, in accordance with European standards and practices of the European Court of Human Rights. The Law on Amendments to the Criminal Code decriminalized defamation and insult. By their deletion from the Criminal Code, insult and defamation no longer exist as offenses, but for such behaviors satisfaction shall be realized only before a court in civil proceedings and they shall be a subject only in civil proceedings. 40 Report on the Work of the Government of Montenegro - 2011


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The Supreme Court of Montenegro adopted the Legal position of principle that, if it determines that there are grounds for liability of journalists and the media, the court shall balance the amount of fair compensation for violation of rights of personality (reputation, honor, etc.) taking into account all circumstances of the case, and in particular: significance of the injured goods and consequences arising there from, duration of mental pain, purpose of non-pecuniary damages, as well as that the amount of adjucated compensation as a rule shall be in accordance with practice of the European Court of Human Rights, and that adjucated compensation shall not be the amount that would have a discouraging influence on journalists and the media in performing their role in preserving democratic values of society. Moreover, the Supreme Court has established the Department for monitoring practices of the European Court of Human Rights (ECHR), composed of three experienced judges of the Supreme Court. Following adoption of the legal position of principle, courts of appeal determined that most of the claims were unfounded, and as such rejected. In a small number of cases in which courts of appeal found that claims were grounded, the adjucated compensation is significantly lower - maximum amount awarded does not exceed € 4,000, and the downward trend of adjudicated compensations is reported, mainly relating to non-pecuniary damages for breach of profession. Aware of importance of respecting and strengthening media freedoms and freedom of expression, the Government of Montenegro in 2011 allocated funds to electronic (€ 4.4 million) and printed media (€ 0.9 million). Moreover, considering importance of media self-regulation for promoting ethical and professional standards, and the need for constituting the Journalists' self-regulatory body as soon as possible, the proposal for a three-year sustainable funding model of the body was defined. Competent authorities investigate cases of violence and intimidation directed against journalists. Reports on the state of cases pending in courts in Montenegro, which refer to criminal cases for offenses with elements of violence against journalists are regularly monitored and updated, as well as the Overview of the state of cases on compensation of damages for harm to reputation, honor or rights of personality in the media, pending before courts in 2010 and 2011.

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ECONOMY AND FINANCES

B

y successfully implementing recommendations of the European Commission during 2011, Montenegro got a hint for the starting date of negotiations in June 2012. By aligning institutional and legal framework with EU standards, economic policy in Montenegro received additional means for increasing competitiveness of economic environment, reducing negative effects of a new wave of crisis and establishing a stable foundation for sustainable growth. Obtaining membership in the World Trade Organization in December 2011 represents confirmation of political and economic efforts of the new team of the Government constituted in late 2010. During 2011, the Government of Montenegro was dedicated to fulfilling the three main priorities. The first was related to fiscal stability. Conditions and resources for smooth financing of consumer units were provided and budget liquidity was reinforced. Along with the successful emission of bonds, credit rating agency Moody's praised the breakthrough made in budget positions and, after two years, changed the rating outlook of Montenegro from negative in stable. Moreover, the Standard & Poor's affirmed the credit rating of Montenegro, which represents a success in current conditions, when ratings of a number of countries are getting worse.

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Improving the business environment was the second priority of the Government. A set of laws contributing to shortening procedures, timelines and costs for citizens and businesses was prepared. These laws have an anti-corruption character, because they eliminate discretionary decision-making and increase transparency of public administration. The process of registering a company was merged into one agency, procedures for paying taxes and contributions were facilitated, administrative fees were reduced and effective procedures for employment of foreigners were established. The third priority was establishment of institutional and human capacities for using EU funds. Coordination structures were defined, responsible persons were designated and road maps and action plans were adopted.

FISCAL POLICY AND PUBLIC FINANCES Fiscal policy during 2011, marked by increased risks (illiquidity of economy, decline of loan activities of banks, the European environment), was focused on reducing macroeconomic and fiscal risks. By defining fiscal "anchors" and rules, sustainable and stable system of public finances was established and conditions for smooth financing of all consumer units was provided. Main instruments of economic policy in 2011 by which Montenegro responded to hints of a new wave of crisis, were a consistent policy of establishing fiscal consolidation and improving the business environment. Beneficial effects of recovery of the world economy, in the first half of 2011, had an additional positive effect on growth of the most economic indicators in Montenegro. In summer 2011, the possibility of a new wave of crisis was indicated. This negative trend grew more certain by the end of the year, primarily because of the rise of skepticism at international financial markets in ability of policy makers to stop the trend of deteriorating public-financial performances of their countries and, in that context, increasing of public debt. Besides reduction of world economic growth projections for 2011and the following year, in recent months there has been an increase in fiscal and financial risks in developed countries which will have a negative impact on economic growth in 2012. Deepening of negative trends in Europe is not only a consequence of continuing crisis in the peripheral countries of the euro zone, but its transmission to the central countries of the region as well. The second emission of Eurobonds was successfully implemented. In April 2011, Montenegro reemerged on the international financial market and emitted Eurobonds in the amount of â‚Ź 180 million. Emission had a double greater demand than the amount offered for sale. More than 60 investors from 21 countries of the world showed confidence by buying Eurobonds, whereby lower interest rates were achieved compared to the last year. Debt management strategy for the period 2011-2012 was defined. During 2011, a trend of increasing public debt continued, and dominantly due to negative effects of deteriorating economic and fiscal performances. The reduced budget revenue, due to decreased imports, investments and weak43 Report on the Work of the Government of Montenegro - 2011


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ened economic activities, and increased expenses, caused by increase of wages, pensions and social benefits, resulted in a deficit that had to be financed by borrowings. The budget deficit in 2011 accounted for 3.89% of GDP, and the projected level for 2012 is 2.5%.

Public debt of Montenegro Public debt of Montenegro on 31.12.2011 amounted to € 1,483.5 million or 45.3% of gross domestic product (GDP). Internal debt amounted to € 419.8 million or 12.8% of GDP, while external debt amounted to € 1,063.7 million or 32.5% of GDP.

Although trends in overall public finances of Montenegro are dominantly determined by trends in budgetary developments, we still need to mention that in this period there has been a further significant fiscal adjustment at the local level, both on revenue and expenditure side. During the following year, economic activity will be largely determined by liquidity of the real sector, and credit activity of banks and foreign direct investment. Projections for mid-term period are based on these assumptions. Positive trends in the banking sector are high and sustained rates of deposit growth, maintenance of liquidity in the banking sector and establishing a credit bank first. Reactions of the market through trust of population in the banking sector and relation with multilateral financial organizations, such as the World Bank, through allocation of funds under favorable conditions are a confirmation of good path for establishing financial stability in Montenegro. The priority objective of economic policy in 2012 is to increase credibility of the Montenegrin economy, with the aim of long-term economic growth and employment. Short-term policies for achieving the objective of economic policy in 2012 will be strengthening fiscal and financial stability and realization of certain investments.

BUSINESS ENVIRONMENT AND FINANCIAL SYSTEM The Council for Regulatory Reform and Improvement of Business Environment and the Ministry of Finance, in cooperation with relevant ministries and the private sector, continued implementation of measures in all areas of economic systems in order to create more favorable conditions for doing business. Particular progress was made in terms of improving the business environment by reducing certain procedures (building permits, employment of foreigners, payment of taxes and contributions, property registration, etc.), as well as reducing transaction costs (administrative fees).

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The principle of one-stop-shop was established for business registration, which allows business entities to register their company, apply for general tax registration, obtain VAT, excise and customs number at a single place. The Law on Bankruptcy was adopted, which defines the basic bankruptcy principles and affirms the urgency and efficiency principle of bankruptcy proceedings, which has been achieved through clear indication and shortening of deadlines for taking actions by all bankruptcy proceedings authorities, particularly bankruptcy judges and bankruptcy administrators. The Law on Enforcement and Security was adopted, whose implementation will eliminate the shortcomings of the existing enforcement system and its inefficiencies, which is reflected in a significant number of backlog cases, duration of the procedure, disputes regarding collection of claims and other, as well as improve the issue future enforcement service through public enforcement officers and apply the recommendations of the Council of Europe. Moreover, the procedures for issuing construction permits were simplified through amendments to a set of laws.

INVESTMENTS AND DEVELOPMENT The project of connecting Montenegro and Italy with an underwater sea cable created systematic prerequisites for Montenegro to be an important partner in the energy sector in the region. By realizing this project, which will connect Montenegro with the EU and the region, our country

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will be positioned in the center of energy exchange between the Balkans and Europe. Interconnections between Montenegro and Italy were the impetus for development of a significant energy potential, particularly in renewable energy sources, throughout the region but also in Montenegro, which already implements activities under the concession agreement for construction of small hydropower plants. It provides construction of 35 small hydropower plants, with the total investment value of €140 million. Building permits were issued for construction of three small hydropower plants, whose values is € 6 million in the Municipality of Kolašin. Urban-technical conditions were issued for construction of 23 small hydropower plants, and issuance of building permits is expected during 2012. Activities on realization of construction of wind farms in two locations, Možura and Krnovo, with total value of about € 150 million and 118 MW of installed capacity are in progress, and obtaining a building permit is expected for 2012 as well. The project of construction of Hydropower plant on Komarnica is in preparation and the EPCG is about to prepare an economic analysis of the HPP project on Morača. The Government of Montenegro regulated with Norwegian experts the field of exploration and production of oil and gas. The next step is publishing tenders for awarding concession for exploration and concession agreements for production of hydrocarbons in the waters of Montenegro. Expected date for publishing tenders is the first half 2012. This project represents a chance for long-term stability of the economy of Montenegro. The policy of the Government of Montenegro in the field of energy implies a responsible attitude towards the existing capacities. In this sense, development loans of the World Bank and Kf W in the amount of €19 million, will reconstruct in an energy-efficient manner about 50 educational institutions and six hospitals, including the Clinical Hospital Centre in Podgorica. Through the project Montesol, interest rates are subsidized to 0 percent on consumer loans for over 2000 households willing to install solar systems on their facilities, while the project "Solar katuns" provide subsidies to 20 percent of capital expenditures for installment of photovoltaic systems on more than 200 buildings. Loans from the Kf W, the EIB and the EBRD, which are invested through five Montenegrin commercial banks were aimed at implementation of EE measures in small and medium enterprises and households, while in 2012 through the WBIF fund it will be possible to nominate EE projects at the level of local self-governments, which directly helps achieving requirements of uniform regional development of Montenegro. Through these specific projects, but also on the level of legislation and strategic documents, the Government of Montenegro has proved that its long-term goal is a balanced regional development. In 2011, the Law on Regional Development was adopted. Map of resources, potentials 46 Report on the Work of the Government of Montenegro - 2011


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and specialization of the region was elaborated as a basis for development of local strategic plans, with a view to identifying development projects focused on evaluation of available resources. With technical assistance from the Ministry of Economy and experts of the EU and UNDP, process of developing strategic development plans of municipalities began with the aim of establishing a systematic approach in implementation of regional development policy. In the first phase of the Strategy of Sustainable Economic Growth through introduction of clusters, cluster mapping was already conducted on the territory of Montenegro. In addition, the "Business Zone Development Plan", which was prepared by the Ministry of Economy, has an intention to stimulate development of micro and small enterprises in a planned and infrastructural equipped land and concrete projects were already realized in Berane and KolaĹĄin. The Government of Montenegro has completed the legal framework for implementation of intellectual property policies, by which conditions for creating a quality environment as it is in the developed world were achieved. Completion of negotiations for full membership in the WTO, by fulfilling conditions that represent a significant part of our commitments confirms this. Montenegro signed the Agreement on free trade with EFTA countries (Switzerland, Norway, Iceland and Liechtenstein) that shall begin to apply from 1 July 2012. At the ministerial conference of WTO member states on 17 December 2011, the approval was given for the accession of Montenegro. This increases the free trade zone, and joining the WTO sends a signal of respecting international rules that will affect the positioning of Montenegro on the international market and impact attracting foreign investment. With integrative processes and signed agreements, Montenegro has positioned itself as a country that has free access to the market of over 800 million people, which is essential for investments in our country. Economic impact study conducted by the WTTC and Oxford Economics shows that Montenegro will have the tourism sector with the fastest growth worldwide over the next ten years in terms of contribution of the sector of travel and tourism to GDP and employment. According to forecasts of the WTTC/Oxford Economics, Montenegro is in first place in the world in terms of investment growth in the sector of travel and tourism, and in second place (after Brazil) in export achieved by foreign visitors. In 2011, 45 hotel facilities were categorized for as accommodation, 19 of which are new (18 hotels and 1 board) with a total of 877 beds.

The World Economic Forum (WEF) reports that Montenegro showed one of the most impressive results from all countries in the world over the past few years, which has found reflection in the WEF's Report for 2011 on competitiveness of travel and tourism sector. As for the actual ranking position for 2011, Montenegro has improved going up by a full 16 places to 36th overall, which is largely a result of recently implemented important reforms. The country’s policy rules 47 Report on the Work of the Government of Montenegro - 2011


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and regulations for the sector have improved substantially, now ranked 10th in this area. The report further confirms that Montenegro has a strong affinity for Travel & Tourism (ranked 7th) which is not surprising given the importance of this sector for the overall country's economy. Tourism infrastructure in Montenegro is praised as "already well developed" (ranked 25th), although the WEF report states that "ground transport infrastructure (109th) and transport infrastructure (62nd) could be further improved to reinforce the country's T&T competitiveness."

The most significant development projects in 2011 • Porto Montenegro Tivat: During 2011, intensive work on preparation of documents and all necessary contracts was conducted in order to commence construction works for a new hotel already in early 2012, which will be managed by the Regent Group, and works for expanding capacities of the marina, whose completion is expected by mid-2014. Total value of works is estimated at over € 50 million, € 8-10 million of which will be invested by the end of 2012. • Luštica Bay Resort Tivat: All necessary planning documents were adopted, and conditions were created for the announced start of work on realization of the investment program for 2012. Early 2012, works on constructing access roads to the location intended for construction of golf courses and marinas will be completed, and completion of construction of golf courses and related training facilities is expected as well. • "Plavi horizonti" Tivat: In 2011, works on preparation and adoption of planning documents was conducted. Commencement of works on realization of the investment project and demolition of the existing building is announced for January 2012. In 2012, more than 10 million investments are expected in this project. • Kumbor: Public tender was announced, two companies took over documentation (ransom). It is expected that negotiations with the first-ranked bidder will end by mid-2012, when the contract will be signed. Total investment is € 250 million.

During 2011, a significant progress was made in order to create conditions for commencement of several major tourism development projects, and for continuation of investments initiated in the previous period. Announced series of investments in the future will have a goal to increase competitiveness of our tourist offer and also have a positive impact on economic growth. According to official data of the MONSTAT, there were 1,373,454 tourists who visited Montenegro in 2011 and 8,775,171 overnight stays were realized. Revenue from tourism totaled € 671 million. Passenger traffic at airports in Montenegro (Podgorica and Tivat) increased by 7.2%, for a period of nine months, while the number of flights was on the same level as in 2010. Moreover, revenues achieved from the tunnel "Sozina" were on the same level as during the period January-October 2010, while national parks during the period of their operation (May-October) had 15% more visitors and 13.9% more revenue. These data indicate significant indirect effects of tourism on business entities that are not from tourism activity. Tourism provides a significant contribution to reducing unemployment, especially during the summer season when there is a need for further engagement of workforce and that need ranges from 10,000-12,000 seasonal workers. 48 Report on the Work of the Government of Montenegro - 2011


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The "Hiking and biking" project - "Wilderness Hiking & Biking" Within the project of valorization of the hinterland and mountainous regions of Montenegro, the state project "Hiking & Biking" holds an important place. The project was awarded the Eco Trophy award by the German association of tour operators and travel agencies for especially successful sustainable projects. During the previous period, intensive work was undertaken on path planning, setting up signalization, marking. About 2,500 km of tracks were marked and about 1000 km of signalization was placed. In cooperation with donor organizations and NGOs, signalization of about 350 km was set up. In cooperation with the Regional Development Agency activities aimed at strengthening the Mountain Rescue Service were realized by purchasing equipment, organizing exercises, seminars and trainings. One of the most significant projects completed in 2011 is the renovation of the home Za Vratlom on the mountain Orjen. The home is constructed in accordance with the principles of energy efficiency and fully integrated into the environment.

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OVERVIEW OF THE MOST SIGNIFICANT INTERNATIONAL REPORTS The Heritage Foundation 12 January 2011 Achieved progress in five indicators In the Economic Freedom Index for 2011, published by the Heritage Foundation, Montenegro’s economic freedom score is 62.5, making its economy the 76th freest out of 179 ranked countries, and progress is achieved in 5 indicators in relation to the last years report. Thereby, our country remained in the zone of moderately free countries, and the highest progress Montenegro achieved in the area of trade freedom and freedom from corruption, where it was rated with 5.9, namely 5 point more in comparison to 2010. According to the Economic Freedom Index, Montenegro achieved during the previous period better results in business freedom, trade freedom and monetary freedom. In those areas, positively rated were activities of the Government on reducing the number of permits required for doing business and activities on facilitating doing business, liberalization of trade regime and further decrease of inflation. In the present year, due to difficulties caused by the global financial crisis, pressure on public finances has been growing, and therefore expenditure from the public budget in terms of reduced liquidity of the private sector, resulting in higher costs of spending and decreases in fiscal freedom in the Index 2011. This correction caused seven positions lower ranking of Montenegro on the list compared to the last year, because suppression of the consequences of financial crisis, financing of structural reforms, as well as creating favorable conditions for the economy resulted in a significant share of public budget in the total consumption.

WESP 19 January 2011 Gowth of Montenegrin economy during this year was three percent The economy of Montenegro could grow this year to three percent, and in the next year four percent, according to the report of the United Nations (UN) called World Economic Situation and Prospects for 2011 (WESP). The document states that the Montenegrin economy strengthened 0.8 percent in the last year. Montenegro is, according to the Report, at the top of the list of countries in the region which economy is expected to be improved during this year.

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Group of economies in transition in the Southeast Europe, which, besides Montenegro, includes Albania, Bosnia and Herzegovina, Croatia, Serbia and Macedonia, achieved a slight increase of economic activities of 0.1 percent during the last year. The authors of this report considers that indicators of growth of economies in transition in the Southeast Europe are weaker, because the poor domestic demand largely dampened the momentum which the increased export has provided.

MOODY’S 31 March 2011 MOODY’S changed rating outlooks from negative to stable Moody’s Investors Service changed the rating outlook of the Ba3 government bonds of Montenegro from negative into stable and confirmed the existing rating level. Rating outlooks for Ba1 forth upper threshold of the foreign currency bonds and B1 for the upper limit for foreign currency deposits were also changed from negative into stable. Moody's decision to change the outlooks from negative to stable followed an assessment of the rating agencies that the Montenegrin government is making efforts to address the key risks that have caused a negative outlook in April 2009. Moody's particularly noted progress in the following areas: (1) The Government has started to improve significant fiscal deterioration that it faced during 2008/09, which is reflected in the fact that budget deficit in 2010 was lower than planned. The authorities also carried out significant measures to respond to some of the more structural weaknesses in public accounts. (2) The economy shows signs of gradual recovery. In 2010, real GDP growth was positive in comparison to earlier expectations, in the second year of recession after a sharp downturn in 2009. Growth prospects for 2011/12 - though far more modest than in the period before the crisis - are more positive than at the time when Moody's assigned the rating of Montenegro a negative outlook. (3) The situation in the banking sector is stabilizing. Levels of funding in the system are strengthened, and owners of foreign banks generally provided support to its local branches, where it was required. This significantly reduced the potential liability of the Government. The liquidity of the banking sector has improved, especially when it comes to returning deposits of population in the system.

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IMF 6 May 2011 IMF welcomes the start of fiscal consolidation After a global crisis that has left a strong impact on the economy, a recovery attempt is in progress. In 2010, good tourist season was accompanied by restoring the production of metals, while torrential rains in the region stepped up production and export of electricity. After contraction, which lasted almost two years, the industry has begun to grow again in the second half of 2010. However, even despite this, industrial production in the end of 2010 was still well below its peak before the crisis. Necessary realignment of the economy began. Inflation and wage growth sharply slowed and the current account deficit has halved to about 26 percent of GDP in 2010. Although much of the improvement was a result of weather conditions, which led to the rapid growth of exports of electricity and due to the recovery of metals production, the recent adjustment to the cost side also led to improvement of competitiveness. Improvement in basic indicators contributed to the premiere emission of Eurobonds in September 2010 in the amount of â‚Ź 200 million, followed by a reduction in interest rate spread and an additional bond emission of â‚Ź 180 million in April 2011. Confidence in the banking sector started to return, as evidenced by the increase in deposits, although their level is still below the level from the third quarter of 2007. However, nonperforming loans are still not stabilized at the normal level and quality of finances has continued to worsen. The lack of improvement at the present time primarily reflects the lack of prudential projects. The IMF welcomes the start of fiscal consolidation and supports the plan of competent authorities to balance the budget of the central government by 2012 and then achieve a surplus. EC 13 October 2011 Progress report of the European Commission on Montenegro for 2011 The economy started to recover in 2010 from the effects of the crisis, growing by 2.5%, after contracting by 5.7% a year earlier. The first signs of revitalization appeared in the second quarter of 2010 after 18 months of continuous contraction. Growth was driven by net exports, private consumption and changes in inventories. From the supply side, the turn around of the global metal market gave an additional boost to local industries, raising total industrial production by 17.5% in 2010. Manufacturing output accelerated further by 9.6% on average during the first seven months of 2011. 52 Report on the Work of the Government of Montenegro - 2011


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The construction sector accelerated rapidly in the last quarter of 2010, with the value of performed construction works expanding by 13% in 2010, compared with the contraction of 21% recorded a year earlier. The value of finalized construction works expanded in the first six months of 2011 by 30.8% year-on-year. Retail sales which had shown a modest increased in 2010 (1.6%) increased further during the first half of 2011 by 14.3% year-on-year. Average per-capita income in purchasing power standards amounted to 40% of the EU-27 average in 2010, down from 41% in 2009. Overall, a modest recovery of the economy is underway. While domestic demand remained subdued in 2010, industry's recovery contributed to a 20% increase of total merchandise exports, with exports of aluminum accounting for 41% of this increase. At the same time, merchandise imports remained virtually flat. As a result, the large trade deficit dropped to 42% of GDP in 2010, from 46% a year earlier. After a successful tourism season the surplus in services increased by 16%, supporting the contraction of the current account deficit in 2010 down to a still very high 25% of GDP, from 30% a year earlier. The current account deficit contracted further during the first half of 2011 by 12.5% yearon-year to 22.4% of GDP in annualized terms. The improvement was mainly driven by a widening surplus on the services and income accounts. Despite the implicit constraints in the form of a limited set of policy tools, the overall macroeconomic stability improved compared to 2010. Doing Bussiness 20 October 2011 In Doing Business Report 2012 Montenegro on 56th position In the World Bank report on doing business for the period July 2010 - June 2011 (Doing Business 2012), Montenegro is ranked 56th place out of 183 ranked countries. Montenegro recorded better results than the previous year, in the areas of registering property, paying taxes, trading across borders and enforcing contracts. Officially, according to the Report, Montenegro has recorded three reforms which placed it among 23 countres that have made so many reforms. Reforms were identified in 3 indicators including: starting a business, paying taxes and closing a business. In the areas of "starting a business", "one stop shop" was introduced for registration of companies, and new business entities were allowed register their company, apply for general tax registration, obtain VAT, excise and customs number at a single place. 53 Report on the Work of the Government of Montenegro - 2011


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In the area of "paying taxes", Montenegro has simplified the payment procedure, making it easier and cheaper for the economy. Implementation of the project of unified registration and collection of income tax and contributions for mandatory social insurance continued, which began in March 2010. The reforms are reflected in amendments to regulations, reduction of contributions for mandatory social insurance and merge of several forms into a single application for registration of taxpayers and the insured persons. In the area of "closing a business", the new Law on Bankruptcy was adopted, which defines the basic bankruptcy principles and affirms the urgency and efficiency principle of bankruptcy proceedings, which has been achieved through clear indication and shortening of deadlines for taking actions by all bankruptcy proceedings authorities. Furthermore, Montenegro has recorded a decline in the areas of issuing building permits and protection of investors. Considering the fact that laws dealing with the procedure of issuing building permits, in order to simplify this procedure, adopted after the Doing Business completed verification of conducted reforms for this report, the reform could not have an impact on our score in this year's report. In the area of protection of investors, our country has fallen one position, although there has been no change in the procedures and costs compared to last year's report. Montenegro has declined for one position primarily due to the progress of other countries in this indicator. From the other countries in the region better ranked than Montenegro are the following: Macedonia (22) and Slovenia (37), while the lower ranked are: Croatia (80), Albania (82), Serbia (92), Bosnia and Herzegovina (125) and Kosovo (117). Standard and Poor’s 13 December 2011 "Standard and poor’s" confirmed credit rating of Montenegro Rating of Montenegro reflects a balance between the country's weak external position and the lack of monetary flexibility compared to the high level of its prosperity, its stable political environment (embedded with good prospects of joining the European Union) and its moderate load by public debt, in comparison to sovereign states with a similar rating. Montenegro has faced with a recession in 2009 and since then has had a slow growth and contraction in lending. Nevertheless, the country still has a high current account deficit, estimated at about 22% of GDP in 2011. The current account fell from 50% of GDP in 2008 and 30% in 2009, to which contributed 40% decrease in import of goods in relation to its peak in 2008. A high current account deficit in Montenegro is to some extent a structural phenomenon and a great need for investments, which will in the medium and long term increase productive capacities of the economy if investments are managed in an efficient manner. 54 Report on the Work of the Government of Montenegro - 2011


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Montenegro's economy is recovering, after a sharp downturn in 2009. After the growth of nonperforming loans at 26% as a proportion of total loans, they have fallen to 18% in October 2011. During 2012, Standard & Poor's expects the economy to grow at a rate of less than 1% with respect to the international economy, although one large foreign investment could significantly raise the product even above those forecasts.

STRUCTURAL REFORMS BUSINESS SECTOR Due to the global economic crisis, which led to a reduced interest of potential investors, there wasduring 2011a significantly lower number of privatization processes realized in relation to initially planned. Accordingly, privatization process during 2012 will be primarily focused on implementation of projects for which during 2011 no public invitation was published, as well as realization of failed projects from previous years. In the area of competition it is important to referto further improvement of legislative framework, which resulted in adoption of the Draft Law on Competition Protection, which is in parliamentary procedure, leading to establishment of the Agency for Competition Protection, which will strengthen the institutional framework in this area as well. Activities continued on improving the area of state aid, primarily by adopting a series of regulations for granting state aid, in accordance with the EC recommendations stated in the Analytical Report. During the next period, special attention will be given on analysis of local government practices and harmonization of local regulations, as well as monitoring of realization of allocated aid. With regard to public procurement, a new law was adopted, whose application will start from January 1, 2012. Aiming to further improve the business environment and tax policy, Montenegro hasundertaken during 2011 a number of activities with a view to providing an additional incentive to remove barriers for business development, primarily by establishing "One Stop Shop", but also by numerous activities on drafting and amending legislation in this area and by making preparations for introduction of the RIA, with effect from 1 January 2012. An additional incentive is provided to further development of small and medium enterprises by completing the strategic framework, adoption of the Strategy for SME Development 2011-2015 55 Report on the Work of the Government of Montenegro - 2011


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and Strategy for encouraging competition at the micro level 2011-2015, including framework action plans. During 2011, the IRF allocated â‚Ź 14.26 million for funding 194 projects of small and medium enterprises, entrepreneurs and farmers, while banksallocated additional â‚Ź 1.72 million. This significant support will be continued in the next period as well. Total environment is further enhanced through application of a unified system of collection of tax on personal income and contributions for mandatory social insurance, as well as a single payment account with effect from 1 January 2011. In the area of network industries, activities continued with a view to further developing energy sector, transport and telecommunications. General guidelines for improving the energy sector in the next period relate to exploitation of hydropower potential (through future construction of hydropower plants) and construction of the underwaterinter-connectioncable between the electricity systems of Montenegro and Italy. In the area of transport, activities related to commencement of the project of Bar-Boljarehighway, on which the Government will make a decision after completion of the Technical study on implementation optionsand Study onenvironmental impact assessment. Byadopting the Master Plan for Development of Public Company Airports of Montenegro and adoptingthe draft Law on Air Transport, additional assumptions were created for future development of air traffic, while the area of maritime affairs will be further improved by enriching the fleet with two ships, which will be delivered to Montenegro during 2012. Final completion ofthe process of restructuring the railway system will be completed by finalizing privatization process of its individual parts. In the area of telecommunications significant activities are recorded in the area of further improvement of legislation (such as drafting the Law on Electronic Communications), while during the next year, special attention will be given to digitalization process, in order to, pursuant to provisions of the Law on Digital Broadcast, have ashutdown of analog technology by January 1, 2013. Following adoption of the Law on Postal Services during 2011, it is necessary to make additional efforts in order to have in the next period completed procedure for privatization of the Montenegro Post.

FINANCIAL SECTOR Stability of the financial system was evaluated with a moderate level of risk. After preparation of individual plans, during 2012 a joint Contingency Plan for dealing with cases of market disruption in the event of crisis will be prepared as well. 56 Report on the Work of the Government of Montenegro - 2011


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Basic characteristics of the banking sector continue to be a burden by low quality assets and loans and reduced credit potential, provided that the liquidity and solvency is satisfactory. At the end of June 2011, solvency ratio at the aggregate level was 15.26% (while the prescribed level is 10%). It is planned that the capital market in the next period be further strengthened through: harmonization of legislation with EU regulations, drafting and adoption of accompanying rules for the Law on Investment Funds, adoption of the Law on Securities and drafting of accompanying rules for the mentionedLaw, etc.

LABOR MARKET In the first 10 months of 2011, labor market recorded positive trends. Data of the Employment Agency of Montenegro indicate that the registered unemployment rate is in steady decline from March 2011, and the number of advertised vacancies in early October 2011 was 18% higher compared to the same period in 2010. At the labor market there is still a significant number of non-residentsengaged, so the number of issued work permits to foreigners by the beginning of October 2011 was 43.5% higher compared to the same period in 2010. Identified problems and the need for their systematic resolution are recognized by the National Strategy of employment and human resources development 2012-2015, adopted by the Government in December 2011, and a special incentive to ensuring flexibility of labor market is expected through implementation of the Law on amendments to the Labor law, which the Parliament of Montenegro adopted in late 2011. Measures that still remain in the focus relate to harmonization of supply and demand, through more efficient linking of education and training, on the one hand, and economy’s needs, on the other hand, in order to timely effect primarily on reduction of unemployment among young people, but also the problem of high share of long-term unemployed persons in total unemployment.

SECTOR OF AGRICULTURE Agriculture is recognized as one of the key sectors for further overall development of Montenegro. Basic guidelines for improvement of this sector are defined by the following documents: "The Montenegrin Agriculture and European Union - Strategy of development of food production and rural areas" and "National program of food production and development of rural areas 2009-2013", and main measures and activities that needs to be taken in the next period are focused on: increasing the efficiency of markets of agricultural products, adoption of the Law on agricultural land, im-

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provement of administrative framework, establishment of the IPARD system, development of rural areas and follow up on providing state aid in agriculture.

ADMINISTRATIVE REFORMS During 2011 the Government has paid special attention to the issue of public administration reform, by completing the strategic and normative framework, adopting the Strategy for Public Administration Reform 2011-2016, and by preparing and adopting set of laws, such as: Law on Amendments to the Law on Public Administration, Law on Civil Servants and Employees, Law on Amendments to the Law on General Administrative Procedure, Law on Amendments to the Law on Inspection Control, and Proposal to the Law on Earnings of Civil Servants and Employees. In the next period, a key activity of the Government in the field of administrative reforms will refer to reducing the number of state administration bodies and the number of employees in state administration bodies, continued reform of the inspection system and introduction of the RIA.

OTHER REFORM AREAS In accordance with the Government's Agenda of structural reforms in health, education, science and research, labor and pension system, during 2011 there were a significant number of activities realized, which, inter alia, resulted in: Amendments to the Law on Higher Education, adoption of the Strategy of development and funding of higher education and other important strategic documents and regulations, which will enable continuation of the educational reform at all levels. In the area of research, special attention was focused on meeting the prerequisites for future establishment of centers of excellence and scientific-technological parks and increasing mobility of Montenegrin researchers. In the area of pension system, what in particular stands out is adoption of amendments to the Law on Pension and Disability Insurance, which will cause a further increase in expenditures for pensions during 2012 for 2-3% of total expenditures. In the health sector, reform follow up will in the next period be focused on the reform of secondary and tertiary levels of health care, as well as on implementation of activities defined by: the National Program for Early Detection of Colorectal Cancer for the period 2012-2016, the National Program for Early Detection of Cervical Cancer for the period 2012 -2016, the Action Plan for Protection and Promotion of children's health by improving the quality of the environment in Montenegro. The area of social and child protection will be further enhanced, due to results of the prepared Analysis, which served as the basis for preparation of the Draft Law on Social and Child Protection, 58 Report on the Work of the Government of Montenegro - 2011


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which is in progress. As, unfortunately, due to a number of comments from concerned companies it did not come to realization of the project "Social card" in the coming period it will be necessary to prepare a proposal for its revision, in order to ensure realization of this important project. Appreciating the fact that the area of environment will represent one of the most challenging negotiation chapters, the Government of Montenegro gives and will continue to give special attention to this area, focusing particularly on the following issues: air quality and climate change, waste management, water management, nature protection, industrial pollution and chemicals and ionizing and ionizing radiation and noise. With a view to mitigating regional disparities, which are a long-standing problem, the Government will continue to make its efforts to further complement strategic basis for solving the problem (by adopting the Action Plan for implementation of the Regional Development Strategy 2012-2014 and the Strategy for sustainable economic growth in Montenegro through introducingclusters by 2016) and to ensure more effective planning and monitoring of policy implementation (by establishing an electronic database of development projects). In addition, the Government will continue to implement specific investment and development projects that will directly or indirectly provide incentive to regional development.

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Government and the Public

"Rethinking and creating the policy in closed cabinets and informing citizens as passive observers of their decisions is the past ... Therefore, I invite every individual to actively and constructively participate in the broader social processes, through an open dialogue and partnership with the Government." Prime Minister of Montenegro Igor Lukšić, the annual press conference, 27.12.2011, Cetinje

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PUBLIC RELATIONS

I

nforming domestic and international public about work and activities of the Government, Prime Minister and Deputy Prime Ministers, presentation of projects and strategic policies, organization and monitoring of various conferences and media activities, improving communication and coordination and administration of the Government's Web portal - are just some of the regular activities of the Public Relations Bureau of the Government of Montenegro. In 2011, the Bureau participated in realization of activities of the Government, which aimed to promote the principles of openness, transparency and participation of the Government of Montenegro. On 7 July 2011, the Government adopted the Publishing Materials from Government’s Sessions, in order to enable the public concerned with faster access to documents of general interest within its jurisdiction. In accordance with this Decision, the Government shall publish on its Web portal the following: • Proposal agenda for Government sessions; • Material that the Government considers at the session if the same is not subject to a specific level of secrecy in line with law: draft laws, bills, public consultation reports, proposal decrees, decisions, strategies, plans, reports and briefs, draft or proposal agreements, proposal resolutions on nomination, appointment or release from duty; • Verified conclusions of the Government, adopted with regard to consideration of the published material. Positive reactions of the media community, civil society and international experts fully confirmed validity of this approach and its importance for strengthening understanding of the process of creating important policies, as well as active public participation in the process. In order to increase transparency, the Government adopted the Decree on procedure and manner of conducting public hearings in law drafting. The Decree established an obligation of conducting public hearings in drafting laws, which regulate the rights, obligations and legal interests of citizens, while for drafting other laws there is no obligation, but the possibility of conducting that procedure. In accordance with this Decree a direct link to the public hearing was set up on relevant web sites (portals of the Government, ministries and e-government). Setting up a link for accessing public hearings and documents which accompany public hearings provide: informing the general public about the planned activities in drafting laws, complete exchange of information between ministries and the public concerned, participation of the public concerned in drafting laws, elimination of negative consequences 61 Report on the Work of the Government of Montenegro - 2011


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in implementation of laws, better definition of public policies and improving the quality of legislation. It also prescribes obligations of persons responsible for coordination of the process of conducting public hearings to record all initiatives, proposals, suggestions and comments and after consultations prepare a report containing an overview of entities who participated in consultations and obtained initiatives, proposals, suggestions and comments. During 2011, the Public Relations Bureau participated in the project "Open Institutions," Center for Democratic Transition (CDT). Within the project, visits were organized of citizens to the Government of Montenegro, and fifteen bulletins of the Government in Montenegrin and English were prepared, which were distributed to approximately 1,500 addresses in the country and abroad. The Government of Montenegrin endeavors to communicate with the public through social networks as well. The Government has an official profile on Twitter (@ MeGovernment) through which it communicates with foreign public, in English. The Prime Minister of Montenegro communicates with citizens through its Facebook page (https://www.facebook.com/igorluksic), he has an official YouTube channel (http://www.youtube.com/user/IgorLuksicMNE) and writes a blog on Montenegrin (http://predsjednik.blog.gov.me/) and English language (http://igorluksic.wordpress.com/). At the end of 2011, the Government of Montenegro has announced launching of an internet platform "Citizens Voice", which will allow direct public participation in creating Government’s policies. Every adult citizen of Montenegro through a special website will be able to initiate an electronic petition, from any area of jurisdiction of the Government. If the petition is supported by 6,000 persons, competent ministry shall be obliged to transform it to an official initiative which the Government will review and, if necessary, submit to the Parliament for consideration.

COMMUNICATIONS WITH CITIZENS

T

he Bureau for communication with citizens represents an internal organizational unit of the Secretariat-General of the Government, which operates within the Prime Minister's Office of Montenegro. The Bureau is engaged in activities related to processing of addresses, i.e. requests, petitions, appeals, by which citizens address exclusively the Prime Minister. Due to the nature of work that is under the jurisdiction of this body, officials of the Bureau as soon as possible meet addresses that natural and legal persons addressed to the Prime Minister, either through direct address, forwarding them to competent institutions requesting feedback or by re62 Report on the Work of the Government of Montenegro - 2011


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ferring them to the relevant address. The Bureau has three employees: Head of the Bureau, who is also advisor to the Prime Minister and two civil servants. During 2011, the Bureau received and processed 869 cases, i.e. addresses of citizens to the Prime Minister. On 859 or 98.8% of the total number of received addresses were responded to citizens and for the most part in writing. The Bureau for communication with citizens is in constant communication with all competent institutions recognized as relevant to solving a number of citizen petitions. Since answers the Bureau provides to citizens depend on communication with one or often more relevant institutions, it is not always possible to predict the exact time in which the information will be collected, but the goal is to deliver the answer always in the shortest possible time.

Why do citizens address the Government? 21,86% (190)

41,43% (360)

Petitions for assistance in employment

Petitions for financial assistance for vulnerable social cases Addresses relating to responsibilities of the Ministry of Labor and Social Welfare Addresses relating to responsibilities of th Ministry of Finance

20,37% (177)

Addresses relating to responsibilities of the Ministry of Sustainable Development and Touri Other

3,57% (31)

5,29% (46)

7,48% (65)

COOPERATION WITH NON-GOVERNMENTAL ORGANIZATIONS

I

n 2011, significant progress was made with regard to cooperation between the Government and NGOs, through improvement of legislative and institutional framework and increase of participation of civil society in the process of drafting laws and other documents. The Law on NGOs was adopted, which significantly improved the normative-legal framework for development and operation of NGOs, in terms of further harmonization with provisions of international documents and practices of the European Court in respect of rights to freedom of association. The Law regulates conditions for establishing NGOs and manner of keeping register of organizations in electronic

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form, establishes a unique way of financing from public funds and the principal criteria for allocation of funds to non-governmental organizations, and financing projects and programs. By amendments to the Law on Public Administration, a legal basis was created for adoption of the Decree on more detailed manner and procedure for cooperation between public administration bodies and non-governmental organizations, and Proposal for the Decree on procedure and manner of conducting public hearings in law drafting was prepared. This subject is for the first time in Montenegro, normatively regulated, allowing cooperation between the Government and non-governmental organizations in the consultative process of law drafting to be regulated in a clear, open and democratic manner. The process of consultations and participation of NGOs in elaboration of legislation and adoption of public policies was promoted. Participation of civil society in a systematic dialogue with the Government was significantly increased, as well as transparency, and the number and quality of consultative talks and regular presentations and exchange of important documents and information. Moreover, the number of joint initiatives of the state institutions involved in protection of human rights and freedoms and civil society organizations was significantly increased, with the aim of improving protection of rights of persons belonging to vulnerable groups. Representatives of NGOs are members of a significant number of working groups for elaboration of regulatory frameworks, such as: laws and bylaws, consultative and advisory bodies, such as the Council for Cooperation between the Government of Montenegro and non-governmental organizations, the Council for Protection against Discrimination, the Council for Children Rights, the Council for the Care of Persons with Disabilities, the Commission for Allocation of Revenue from Games of Chance, the Commission for Monitoring Results in Fight against Organized Crime and Corruption, the National Council for Sustainable Development.

Open Government Partnership In September 2011, Prime Minister Lukťić took part in an inaugural meeting of the multilateral initiative "Open Government Partnership", where Montenegro became its member. The meeting was attended by 46 countries, whose governments are committed to principles of the Universal Declaration of Human Rights, the UN Convention against Corruption and other instruments for protection of human rights. In accordance with the requirements of membership of Montenegro in the Partnership, the Prime Minister of Montenegrin Government announced that the Government will intensify cooperation with the civil sector, especially in terms of their active involvement in future negotiation process with the European Union and harmonization of the existing Law on Free Access to Information with EU standards.

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With a view to strengthening the role of NGOs at the local level, with the help of international partners, activities were conducted on defining mechanisms and models of citizen participation in performing public affairs and financing of NGOs from local sources.

THE OFFICE FOR COOPERATION WITH NGOS In accordance with the document "The Basis of Cooperation between the Government of the Republic of Montenegro with non-governmental organizations", the Office for Cooperation with NGOs was established in 2007 within the Secretariat-General of the Government, as an internal organizational unit, and an institutional mechanism for achieving cooperation. The Office was initially in charge of conducting activities relating to preparation of plans, programs, projects and other activities in accordance with the principles and objectives set forth in the document "The Basis of Cooperation" and other documents, developing mutual cooperation and coordination, not affecting the independence of NGOs and improving transparency of its own and the work of NGOs, in order to continue building an open and democratic society. Namely, since the Government in 2009 adopted the Strategy of Cooperation between the Government of Montenegro and NGOs and the Action Plan for its implementation for the period 2009-2011, the Office received new responsibilities in terms of monitoring implementation of the Strategy and the Action Plan. The Office also performs activities on coordination of work of public administration bodies in the field of cooperation with NGOs, especially civil servants and employees in charge of cooperation with nongovernmental organizations, taking care of their education and connection to the internal network-infrastructure of public administration bodies for cooperation with NGOs. Activities of the Office in 2011 were focused on creating new and strengthen existing institutional mechanisms for cooperation between the Government and non-governmental organizations, in accordance with the Strategy for Cooperation between the Government of Montenegro and non-governmental organizations and the Action Plan. The Office was involved in the process of preparation and adoption of the new Law on Non-Governmental Organizations, and participated in drafting bylaws relevant for participation of NGOs in decision making processes. In cooperation with the CRNVO and TACSO during 2011, the Office participated in trainings of civil servants in charge of cooperation with NGOs. Head of the Office participated in international conferences on cooperation of public and civil society, social dialogue and participation of citizens and NGOs in the process of adoption of public policies, presenting Montenegro's best practice. The Office actively participated in the project National Convention on European Integration of Montenegro (Co-chair of Working Group III), implemented by the NGO European Movement in Montenegro, and the Slovakia Foreign Policy Association, with support from governments and parliaments of Montenegro and Slovakia. The Office is a member of the TACSO LAG project (Local Advisory Group of the Project of Technical Assistance for Civil Society Organizations in Montenegro, participated by representatives of NGOs, the OSCE, EUD, unions, and media). 65 Report on the Work of the Government of Montenegro - 2011


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The Office performed professional, administrative and technical activities for work of the Council for Cooperation with NGOs.

THE COUNCIL FOR COOPERATION WITH NGOS The Council for cooperation between the Government and NGOs was constituted on 25 January 2011, as an independent advisory body. The Council consists of a President (representative of the Government) and 12 representatives of the Government and NGOs each. The Office for Cooperation with NGOs undertook the process of proposing candidates for members of the Council. Representatives of the Government in the Council were proposed by ministries, and the President of the Council by the Deputy Prime Minister's Office of Montenegro for political system, internal and foreign policy. Head of the Office for Cooperation with NGOs officiates at the function of a member and secretary of the Council. Representatives of non-governmental organizations in the Council were chosen through a public tender. In 2011, the Council held seven sessions, where they discussed issues of utmost importance for NGOs (Law on NGO, regulations, decisions, analyzes, reports on cooperation of public administration bodies and NGOs, the Action Plan for implementation of recommendations from EC Opinion). The Council regularly submitted opinions to the Government on documents it considered with proposals and suggestions for taking appropriate measures. On 16 June 2011, the Government adopted the Analysis of the model for financing NGOs from public funds, which was previously considered and endorsed by the Council for Cooperation between the Government of Montenegro with NGOs.

Cooperation between ministries and other public administration bodies with NGOs In 2011, there were 55 people from ministries and other public administration bodies appointed to be in charge of cooperation with NGOs. During 2011, dozens of public calls of public administration bodies, mainly ministries, were published for non-governmental organizations to propose their candidates for members of working groups and committees for preparation of various documents. At the beginning of June, the Government reviewed and adopted the Report on cooperation between ministries/public administration bodies with NGOs in 2010 and the first quarter of 2011, which is the first document that put together information on different forms of cooperation (a) financing, (b) information and consultation, (c) participation in working groups, and (d) monitoring of implementation of public policies, (e) signed memoranda of cooperation, (f) joint projects. Information and consultation was the most common form of cooperation, represented in 25 bodies - 68.42%, while monitoring of implementation of public policies and joint projects were at least represented, only in 5 bodies - 13.16%.

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FREE ACCESS TO INFORMATION

T

he Secretariat-General of the Government of Montenegro received and responded in 2011 to 163 requests for free access to information.

Requests for free access to information

20,25% (33) 34,97% (57)

Decisions allowing the access

6,13% (10) Decisions rejecting a request

Conclusions on dismissal in accordance with Article 116, Paragraph 2, Item 4 of the Law on General Administrative Procedure

Decided upon request in accordance with the Law on Administrative Procedure in a different manner (the applicant was given notice of the competent authority which possesses information)

38,65% (63)

As you can see, most requests were filed by non-governmental organizations.

Who are the applicants of requests for free access to information? 1,23% (2) 8,59% (14)

0,61% (1)

0,61% (1) NGOs

Natural persons (citizens)

Companies

Political parties

Media

88,96% (145)

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Report on the Work of the Government of Montenegro - 2011