Montenegro and Western Donors

More Assistance After All

Although relations between Podgorica and the West grew cooler at the end of last year, international assistance to Montenegro not only continued, but was expanded as well.

AIM Podgorica, April 20, 2001

Until recently a favorite of the West, an "oasis of peace and inter-ethnic harmony in the embattled Balkans," as it was frequently called, after the fall of the Milosevic regime Montenegro has been assigned a new, less pleasant role. With a referendum on independence looming, it is clear that the world does not support Montenegro's course. It became obvious during Djukanovic's attempt to win over the new administration in Washington at the beginning of the year, and it was confirmed at a recent conference on Montenegro held in Brussels under the auspices of the Center for European Political Studies and the German Friedrich Ebert Foundation.

This marked an end to harmony in relations between Podgorica and the international community. Even the US embassy in Belgrade recently issued an statement critical of a new Montenegrin referendum bill. This is why an increasing number of people are asking themselves what will happen to the generous Western aid that the Montenegrin government kept asking for and readily accepted.

What is the nature and the amount of assistance arriving in Montenegro from abroad? A number of foreign humanitarian organizations are located in the country whose role in sheltering refugees is substantial. Namely, during the 1999 NATO intervention, 280,000 refugees arrived in Montenegro, mostly ethnic Albanians from Kosovo. Today, there are some 70,000 of them, meaning that they currently account for over 10 percent of the population. Had it not been for international support, Montenegro could have hardly managed to feed so many of these unfortunate people.

Furthermore, there are also over 50 foreign non-government organizations with offices in Podgorica and across Montenegro, which play an important role in financing the emerging local civic society sector. It is not exaggeration to say that international donations protect this sector from dying away.

The most significant aspect of international support to Montenegro is, however, direct aid to the government meant to fill the budget and alleviate social problems. The US administration last year sent about DM107 million in assistance to Montenegro, mostly to cover the budget deficit (DM58.6 million), for pensions (DM23 million), the import of electricity (DM16 million), development of agriculture and the health care system (DM9 million), and the European Union supported Montenegro with some DM48 million (DM25 million for the budget, DM4 million for developing road infrastructure, DM4 million for electricity, DM13 million in assistance to refugees, and DM4 million for health care). Although relations between Podgorica and the West were rather cool at the end of last year, the aid not only continued but was even expanded. With the exception of Israel, Montenegro is today the biggest recipient, per capita, of US assistance in the world. According to official reports, by the end of this year the US should send about US$70 million in aid to Montenegro: US$13 million in emergency food aid, US$31.5 million for pensions and electricity, US$9 million for economic reforms and as technical assistance, US$3 million for developing the private sector, and US$14 million to support democratic reforms, development of the non-government sector and independent news media.

Simultaneously, the EU has approved EUR61 million to support further reforms in Montenegro this year. Of that, EUR10 million will arrive as direct humanitarian assistance, EUR10 million for food, EUR20 million for infrastructure, education and transport, and EUR20 million for various emergencies.

The basic goal of this year's economic policy of the Montenegrin government is to ensure the country's economic sovereignty. According to the government economic plan, the gross domestic product should grow 5 percent in 2001, primarily owing to an envisaged increase in tourism services by 20 percent, and measures the government plans to undertake to legalize the grey economy. Simultaneously, according to the project, public spending should not exceed 50 percent of the GDP.

Montenegro, which in the former Yugoslavia used to be financially dependent, managed to provide for its own financial security for the first time in 1994. This was at the time international sanctions against Yugoslavia were in effect, and it was facilitated by so-called transit deals, which, now that they are almost non-existent, have begun to raise many eyebrows. Today, Montenegro's budget deficit is some US$150 million, that is, 12 percent of the gross domestic product. This is why many rightly ask how Montenegro plans to be sovereign when it depends on foreign donations.

Giliette Derique came to Montenegro with her husband, manager of the Niksic Brewery purchased by the Belgian Interbru company. As editor in chief of the recently started Monet specialized magazine, she is closely monitoring the issue of Montenegro's budget deficit. She stresses that budget revenue accounts for less than one-half of the total state revenue. Its chief sources are sales and excise tax (30 percent), employer-paid salary deductions (DM135 million) meant solely for welfare funds, whereas DM82 million in income tax is split between the budget and municipalities. The tax levied on international trade and transit accounts for 7 percent of the total revenue, and that much is also obtained from various administrative fees. Derique says that that 11 percent of budget revenue falls into the category of "other revenue," the sources of which are not known.

Derique also says that it is very difficult to have a clear insight into all foreign financial assistance. The Finance Ministry has formed a service to monitor all donations and projects. According to her, foreign assistance will gradually go directly to the projects for which it was approved, without passing through the budget, so that a better insight into the manner of their spending could be ensured.

For Montenegro this type of assistance, of course, is necessary. The republic's GDP today is only 58 percent of that in 1990, while its industrial output is one-half of what it used to be 11 years ago. In 1989, Montenegro's GDP was almost US$1.5 billion, and today it hardly reaches US$700 million. In this it should be kept in mind that this year was the first in a decade in which the GDP went up.

About 115,000 people are currently officially employed in Montenegro, of which 80,000 work in industry. Of the latter, however, there are as many as 20,000 who do not receive their paychecks on time. Their salaries are months overdue, sometimes even years. A campaign is currently underway, initiated by trade unions, to have all the workers paid their guaranteed wages. It is estimated that this will cost the government about DM15 million. The following data shed even more light on Montenegro's economy: the unemployment rate is 28 percent, there are over 80,000 unemployed people, and the number of pensioners is even higher. The average salary is some DM200, and the lowest wage is DM80.

This bleak picture of the Montenegrin economy clearly indicates that radical structural reforms are needed to curb current negative trends and create ways for recovery and conditions for sustainable long-term economic growth. But in order to do either Montenegro has to do its homework -- to ensure macroeconomic and political stability and harmonize its legal system with that of the EU. Rajko Milovic, secretary of the republican Secretariat for Legislation, says that this job is almost completed and that some 40 laws or so have been harmonized with EU standards.

The basic problem in providing for successful economic development lies, therefore, in Montenegro's undefined status and the unstable political conditions in the region.

"I am afraid that the big discussion about Montenegro's state and political status and relations between Montenegro and Serbia in general serves as a handy excuse for delaying reforms in both republics," says Dr. Veselin Vukotic, vice chairman of the Montenegrin Council for Privatization and a coordinator of the G-17 think-tank. The unresolved status of Montenegro, he adds, substantially delays economic reforms in the smaller republic. "In my view at issue here is not whether to go ahead with or without Serbia, but whether we have enough courage to say that we can economically take responsibility for our existence," says Vukotic.

This only shows to what an extent the Montenegrin story about transition and reforms is linked to the story of independence.

Dragan Djuric

(AIM)