Republic of Montenegro Ministry of Finance - Ministarstvo finansija

Republic of Montenegro
Ministry of Finance
BULLETIN OCTOBER
- DECEMBER 2005.
Number II

REPUBLIC OF MONTENEGRO
MINISTRY OF FINANCE
BULLETIN II
OCTOBER-DECEMBER 2005
www.ministarstvo-finasija.vlada.cg.yu
TAX ADMINISTRATION: www.poreskauprava.vlada.cg.yu
CUSTOMS OFFICE: www.gom.cg.yu/carine
ANTI-CORRUPTION DIRECTORATE: www.antikorup.vlada.cg.yu
DIRECTORATE FOR ANTI-MONEY LONDERY: www.gom.cg.yu/aspn
DIRECTORATE FOR REAL ESTATES: www.nekretnine.cg.yu

CONTENTS
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
CONTENTS:
4-5
6-15
16-18
19
20-21
22
23-24
25-26
1. INTRODUCTION
- Igor Lukšić, Ph.D., Minister of Finance
2. BUDGET FOR 2006
- Milan Dabović, Ph.D., Assistant to the Minister,
Ivana Vuletić, Executive, Budget Policy and Procedure
Department
3. CONSOLIDATED PUBLIC SPENDING
- Stanko Jeknić Ph.D., Head, Macroeconomic
Analysis and Co-operation with International Institutions
Department, Radovan Živković and Slobodanka Labus,
Independent Advisors I, and Snežana Mugoša
Senior Advisor I
4. CAPITAL BUDGET
- Ljiljana Crnčević , Executive, Public Investment Planning
Department, Budget Sector
5. PRIVATIZATION OF BANKING SECTOR
- Milorad Katnić, M.A., Assistant to the Minister , Bojana
Bošković
6. CREDIT RATING OF MONTENEGRO
- Vladimir Kavarić , M.A. Secretary, Ministry of Finance
7. OUTLINE OF THE CUSTOMS TARIFF LAW
- Koviljka Mihailović, Assistant to the Minister,
Mitar Bajčeta, Independent Advisor I
8. WHICH AMENDMENTS
WERE MADE TO THE EXCISE DUTY LAW
- Koviljka Mihailović, Assistant to the Minister,
Ružica Glomazić, Senior Advisor I
2

CONTENTS
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
27-28
29
30-31
32
33
34-36
37
38
39-40
41
42
43
44-45
46-48
9. ROLE OF THE CUSTOMS SYSTEM IN THE OVERALL
ECONOMIC REFORM PROCESS
- Miodrag Radusinović, Director - Customs administration
10. ACTIVITIES AND DEVELOPMENT OF ADMINISTRATION
FOR THE PREVENTION OF MONEY LAUNDERING
- Predrag Mitrović, M.A., Director - Administration for the
Prevention of Money Laundering
11. ANTI-CORRUPTION ACTIVITIES IN MONTENEGRO
- Veselin Šuković M.A., Director - Anti Corruption Initiative
Administration
12. RESTITUTION
- First Compensations - Đorđina Lakić, Director,
Compensation Fund
13. RESTITUTION - SECOND-INSTANCE PROCEDURE
- Zoran Radulović, Independent Advisor I
14. CO-OPERATION WITH INTERNATIONAL INSTITUTIONS
- IMF - INTERNATIONAL CO-OPERATION DEPARTMENT
- Executive, Jadranka Radunović, Nataša Kovačević,
Dragan Darmanović - advisors.
15. CAPITAL MARKET OF MONTENEGRO
- Predrag Stamatović, Advisor to the Minister
16. INSURANCE SECTOR IN MONTENEGRO
-Milanka Obradović, Biljana Doderović,
Insurance Supervision Unit
17. PUBLIC PROCUREMENT OF MONTENEGRO
- Katarina Radović, Secretary, Public Procurement Commission
18. OLD FOREIGN CURRENCY SAVING BONDS
- Nataša Novaković, Independent Advisor I
19. IMPLEMENTATION OF THE LAW ON CIVIL SERVANTS
AND STATE EMPLOYEES
- Bosa Pavićević, Head, Payroll Accounts Sector,
Olga Uskoković, Advisor
20. STABILE FUNDING OF THE DEFENSE SYSTEM
- Mijajlo Savović, M.A., Advisor for the Defense Budget,
Ministry of Finance
21. THE MOST IMPORTANT ACTIVITIES OF THE FINANCE
MINISTER - PR SERVICE
- Ana Miljanić, Spokesperson, Ministry of Finance,
Maja Bašić, Senior Employee I
22. LEGISLATION RELATED ACTIVITIES
- Ana Miljanić, spokesperson - Ministry of Finance
Bulletin of the Ministry of Finance
October-December 2005
NUMBER:
2
PUBLISHED:
quarterly
PUBLISHER:
Republic of Montenegro
The Ministry of Finance
FOR PUBLISHER:
Igor Lukšić Ph.D.
EDITOR-IN-CHIEF:
Ana Miljanić
EDITORIAL BOARD:
Koviljka Mihailović, Milorad Katnić
M.A., Milan Dabović PhD
TRANSLATOR:
Jelena Čađenović
Design:
Adil Tuzović
CONTACT:
PR Office of the Ministry of Finance
TEL:
+381 81 224 581
FAX:
+381 81 224 450
E-MAIL:
mf@mn.yu
WEB:
www.ministarstvo-finansija.vlada.cg.yu
ADDRESS:
Stanka Dragojevića 2, Podgorica
PRINT:
NJP Pobjeda
COPYES:
400
3

Introduction
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
MINISTER OF FINANCE
IGOR LUKŠIĆ, PH.D.
CONTAKT:
PHONE:
+381 81 242-835,
FAX:
+381 81 224 450
E-MAIL:
mf@mn.yu
WEB:
www.ministarstvo-finansija.vlada.cg.yu
Introduction
Dear Readers,
We are at the begining of a very important
year for Montenegro both in political
and economic sense. We are entering
a final phase of the economic transition,
which will be marked by bringing to an
end the privatization process and carrying
on in-depth reforms of the pension and
public health system. A set of adopted
laws creates a stabile framework for facing
these and, later on, post-transition challenges
in the European integration process.
At the same time, in the course of
2006, issue of the state and legal status of
the country is going to be resolved, which
will significantly influence further development
of the Montenegrin economy.
Last year was a successful one for the
Montenegrin economic system. For three
years in a row, the macro-economic situation
has been stabile with growing GDP.
Although official statistics shows the GDP
growth of about 4%, according to assessments
made within the Ministry of Finance,
it seems that such growth is, however,
bigger - exceeding 5%. Unemployment
rate is decreasing and, after a long period
of time, fell below 19%. Inflation is further
decreasing and last year it was about 2%
although it was projected 3%. Budget revenues
were also stabile, out of which tax revenues
during 12 months of 2005 are higher
by about 17% compared to those in
2004. Deficit has also been decreasing
along with implementation of a strong fiscal
consolidation in 2005, through reduction
of all forms of public debt or general
government sector debt. This is particularly
reflected in reduction of internal debt
through reduction of the bank credit and
treasury bills liabilities, which resulted in
about 1% interest rate on the treasury bills
at last auctions in 2005. In a larger sense,
interest rates are gradually decreasing,
which indicates a reduction of general risk
rate in Montenegro. There is only a foreign
trade imbalance, but it is inevitable for a
developing country. Finally, it means that
foreign currency saving serves for domestic
investment. The overall picture will
progressively be better along with expected
increase of export.
Such policy and achievements in the
implementation of reforms, creating a stabile
institutional business environment
and improved position of Montenegro at
the international global market led to improving
of the country's credit rating with
the renowned international institution for
assessment of a credit risk - Standard &
Poor's. In the very first year, the credit rating
mark "BB stabile" was promoted to
"BB positive" based on a significant progress
in the economic and policy reforms
and in strengthening of the macroeconomic
stability. We may expect a faster
growth of our credit rating after realization
of planned referendum, together with
growth of foreign investment. Completion
of reforms and restructuring of the banking
sector, which has been strongly progressing
with a huge capacity for further
growth, should contribute to this end.
4

Introduction
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
In addition to repayment of debt related
to old foreign currency savings, in
2005 we launched a very strong process of
restitution, which is aimed at recognizing
importance of private property protection
in accordance with the relevant law. After
a year and a half from adoption of the law,
first compensations were paid. The above
process was launched in the neighbouring
countries ten years ago, while related
compensations were only recently paid.
Strong contribution to protection of private
property and thus creation of conditions
for attraction of foreign investment
will be made by adoption of set of laws to
be prepared during 2006. These are property
laws, among which the most important
one is a law on property relations.
In February 2006, we are to conclude
the current agreement with the IMF, which
should be a confirmation that macroeconomic
policy was successfully conducted in
the previous period. The agreement with
the IMF is connected with programs of other
international financial institutions,
thus ensuring the fastest way for verifying
legitimacy of the economic and fiscal situation
in the country. Montenegro, as an
open country, established good communication
with international community, improved
its economic position and fiscal stability,
so that relations between Montenegro
and IMF will not be suspended in future,
while the very form and the contents of
an agreement will depend on objectives we
want to achieve. The IMF reports on the situation
in Montenegro indicate a constant
improvement and execution of the agreed
schedule of tasks under the agreement. In
the transitional period, until relations with
Serbia are resolved, communication with
the IMF will continue on the principle of
monitoring of the economic situation. Given
that 2006 is a year of elections, it is natural
that a new government negotiates on
a program of co-operation to which such
government will be committed, although,
some basic principles might be established
meanwhile.
In 2006, tax framework will be further
analyzed, both at state and local level,
which should result in further tax cut in
compliance with a budget framework and
projections, primarily, with respect to income
tax by phasing out progressive taxation
and introducing one rate. All previous
tax reforms were successfully implemented.
Tax burden on labour was cut by
10%, while as of 2006 profit tax rate of 9%
will be applicable. Nothing spectacular
will happen upon the country's international
recognition next year as regards the integration
process. We will continue talks
with the EU and WTO about the integration
processes according to defined dynamics.
It will be important to regulate a
membership into the international financial
institutions in line with their relevant
procedures.
However, irrespective of economic issues,
2006 is strongly marked by political
events, which should verify a democratic
maturity of the Montenegrin society and
its way toward a lasting democratic consolidation.
For that reason, regaining full sovereignty
through international recognition
will lead to even stronger growth and development.
Rise in investments and number
of new jobs should amortize inevitable process
of public administration reform, through
its further mainstreaming, which, together
with further reduction of public
spending and public debt and increase in
the Republic budget revenues, remains main
objective of the fiscal policy.
Sincerely,
Minister of Finance
Igor Lukšić, Ph.D.
Cabinet-meeting of the Ministy of Finance
5

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Budget of the Republic of
Montengro for 2006
1. MACROECONOMIC FRAMEWORK AND PUBLIC EXPENDITURE
ASSISTANT TO THE MINISTER OF FINANCE, MILAN DABOVIĆ, Ph.D.
MANAGER OF THE DEPARTMENT FOR BUDGET POLICY AND PROCEDURES, IVANA VULETIĆ
Phone: 081- 243-274, 225-266 ; e-mail: mf@mn.yu;
Economic policy of the Government of the Republic of Montenegro and objectives defined by the Agenda of Economic Reforms represented the
starting point for preparation of the budget for 2006. Proceeding from the basic objectives of economic policy it is projected in 2006 to lower the deficit
level, reduce its share as well as the total public expenditure share in GDP. The basic parameters of fiscal policy are adjusted to the frameworks
and objectives agreed with the IMF and the World Bank and harmonized with the EU directives.
Public expenditure in 2006 is projected in accordance with the trend of
basic economic indicators, which represent the starting framework for estimation
of fiscal potential from domestic funding sources. Consistent data
about gross domestic product size presented in the Agenda of Economic Reforms
in Montenegro as well as in the IMF papers, determined their usage in
the analysis of macroeconomic trends and relative comparisons of the basic
categories of public expenditure with GDP trends in the period from 2003-
2007. According to the Agenda estimated size of GDP is higher than the IMF estimation, and average annual rates show stable economic growth trend
in the period from 2003 to 2007. Starting estimates show that the gross domestic product in 2005 will amount to 1.644,00 mil.eur and that annual
nominal growth rate will amount to 7,10%. For 2006 the nominal growth rate is projected to amount to 7,00% and real 4,5%, with gross domestic
product amounting to 1.759,00 mil.eur .
Public expenditure level is to the greatest extent determined by the estimated Gross Domestic Product for 2006 as well as the data about flows of
revenues in the previous period with the monthly decomposition of their realization for each year individually. Consolidated public expenditure and
budget of the Republic of Montenegro are projected within the limits which provide for relative reduction of their share in the gross domestic product,
as well as absolute and relative deficit reduction.
It is planned that public expenditure reduces its share in GDP during 2005 and 2006. If we exempt project loans from 2005 and 2006 we can see
that public expenditure in the Republic of Montenegro reduces its share in the Gross Domestic Product from 45,52 % in 2004 to 45,19 % in 2005 and
that by the budget for 2006 further public expenditure share reduction to 44,19% is projected. After consolidation of contributions paid by employer,
share of public expenditure in gross domestic product is significantly lower and amounts to 42,78 %. In accordance with the economic policy objectives
and objectives defined by the Agenda of Economic Reforms the proposed budget will provide for further public expenditure balancing in 2006
along with relative reduction of deficit share in GDP.
1 - In the text will be used BDP estimations defined by the Agenda of Economic Reforms for Montenegro from April 2005. These are for 2005 1.644 mil.eur, for 2006 1.759.mil.eur and for
2007 1.873,30 mil.eur.
6

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Projected absolute and relative reduction of consolidated deficit shows
that Montenegro creates conditions for a stable concept of financing public
expenditure, what along with regular fulfilment of obligations in relation to
foreign debts provides for a quality cooperation with the international financial
institutions. Thus, direct international community support continuation
is provided for reforms in public finances, education and health
system, as well as infrastructure funding through project loans.
Deficit share in GDP
Deficit financing in the next year will be provided from the budget of
the Republic, and in that way will be created necessary conditions for regular
fulfilment of obligations which come within the domain of extra-budgetary
funds - pensions, health protection and compensations for unemployed
persons. Namely, transfers to the extent which will provide for a stable
system of social and health protection determined by law are projected by
the budget, and funds which are necessary for possible military pensions financing
and health protection of military persons are also put asside.
Consolidated deficit of public expenditure for 2006 is projected at the
level of 30,07 mil. eur, what is 13,04 mil. eur less in relation to 2005. It is
planned that deficit share is 1,71 % in Gross Domestic Product in 2006, what
means relative decrease in its share by 1 index point. Apart from deficit for
2006 debts repayment is projected to the amount of 31,39 mil. eur, so that
funds for deficit funding and debt repayment amount to 61,39 mil.eur. Funding
sources are provided from credits to the amount of 9,18 mil. eur, donations
5,50 mil.eur, project loans 12,00 mil. eur, privatization proceeds
29,28 mil. eur and deposit funds 5,51 mil. eur.
State budget expenditure after exemption of transfers is projected to the
level of 423,10 mil.eur with share of 24,05 % in the gross domestic product
in 2006, Pension and Disability Fund Insurance to the amount of 165,13 mil.
eur with share of 9,39 % in the gross domestic product, Health Fund to the
amount of 112,09 mil. eur with share of 6,37 % in the gross domestic product
and Employment Bureau to the amount of 16,23 mil. eur with share of
MACROECONOMIC FRAMEWORK
%share
DESCRIPTION 2004 2005 2006
Gross Domestic Product 100,00 100,00 100,00
State budget of Montenegro 23,82 24,06 24,05
Pension and Disability Insurance Fund 9,88 9,31 9,39
Health Care Fund 6,15 6,64 6,37
Employment Bureau 0,73 1,16 0,92
Local self-governance 4,93 4,02 3,91
PUBLIC EXPENDITURES 45,51 45,18 44,64
0,92 % in the gross domestic product. At the local governance level the expenditure is estimated to the amount of 68,71 mil.eur or 3,91 % of the gross
domestic product.
Public expenditure funding sources in 2006 will be provided from taxes at the level of 462,66 mil.eur, contributions 203,99 mil.eur, duties 18,34
mil.eur, compensations 28,20 mil.eur, other revenues 40,36 mil.eur and deposit funds to the amount of 4,93 mil.eur. In that process tax revenues show
significantly faster dynamics of growth of contributions, duties, compensations and other revenues.
Taxes are projected at the level of 462,66 mil.eur and revenues will be provided mostly from the Value Added Tax to the amount of 215,11 mil. eur.
During 2004 value added tax collection was by 7,84 % higher than projected, while in comparison to 2003 revenues on this basis were higher by 15,21
%. In addition, in 2005 revenues realization on this basis was estimated at the level of 195,00 mil.eur, while the planned level was 188,89 mil.eur. Next
7

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
year a bit more moderate dynamics of revenues
growth from value added tax with 10% rate at the
annual level is projected, having in mind that fiscal
effects of growth were the highest during the
first three years and that we can not expect high
rates in the next year as in the previous period.
Physical Persons Income Tax is projected at the level
of 88,03 mil.eur out of which 70,38 mil.eur is
intended for funding the budget of the Republic
of Montenegro and 17,65 mil.eur to finance the
local governance needs. It should be pointed out
that reduction of rates for the Physical Persons Income
Tax calculation by 10% did not bring about
reduction inflow on this basis. However, revenues
growth dynamics is a bit more moderate so that
the total revenue on this basis is estimated at the
level of the gross domestic product growth. In addition,
as regards collection of Physical persons income
tax positive fiscal effects are expected with
application of the Law on unified registration and
system of reporting about calculation and collection
of taxes and contributions in 2006. Revenues
from Legal persons profit tax are projected at the
level of 16,04 mil. eur and they are lower than
Assistant to the Minister of Finance, Milan Dabović, P.hD.
Manager of the Department for Budget Policy and Procedures, Ivana Vuletić
projected in 2005, what is consequence of profit tax rate reduction from 17,00 % to 9,00 %, which will be applied in 2006. Excises are projected at the
level of 77,54 mil.eur and are higher than planned for 2005. Higher collection is determined by revenues from excises which are collected in the course
of import, what corresponds to Value Added Tax collection. International trade and transactions tax is planned at the level of 39,71 mil. eur what is at
the level of the plan for 2005. Lower dynamics of revenues growth on this basis is consequence of import of goods from the Republic of Serbia, as well
as due to concluding several agreements on free trade with the sorrounding countries, for which reduced tariff rates are determined.
Duties, compensations and other revenues in 2006 are projected at the level of 86,90 mil. eur. Duties are projected at the level of 18,34 mil
.eur and the biggest part is related to the taxes which belong to the budget of the Republic 10,54 mil. eur, while duties intended for the Employment
Bureau amount to 1,40 mil.eur, and for local governments needs funding 6,40 mil.eur. Compensations are projected at the level of 28,20 mil. eur out
of which for the Republic budget funding is planned 10,83 mil. eur and for local governments funding 17,37 mil. eur. Other revenues for the next year
are projected to the amount of 40,36 mil. eur and the biggest part is related to the budget of the Republic of Montenegro 34,12 mil. eur, out of which
the biggest part is planned on the basis of fines and arrear tax claims collection.
Contributions in 2006 are planned at the level of 203,98 mil. eur out of which 122,00 mil. eur is related to pension and disability insurance contributions,
contributions for health insurance 76,69 mil. eur and contributions for unemployment insurance 5,30 mil.eur
Foreign funding for 2006 is projected to the amount of 10,07 mil.eur, i.e. with projected withdrawal of funds on the basis of project loans 12,00
mil. eur, foreign funding amounts to 22,07 mil. eur. Donations are projected to the amount of 5,50 mil. eur, out of which 4,50 mil. eur is related to
the EU Macro-financial assistance, 0,10 mil. eur to Integral management of the Skadar lake ecosystem - Ministry of Environmental Protection, 0,90
8

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
mil.eur to construction of the Penitentiary Institute facilities and 0,004 mil.eur for financing the shelter in the framework of the program of the National
coordinator for fight against human trafficking. Foreign credits are projected to the amount of 5,11mil. eur and are related to the specific -purpose
IDA credits (Pension System Promotion Project 1,50 mil.eur, Health System Promotion Project 2,50 mil.eur and Education System Promotion Project
1,11 mil.eur.
Policy of expenses in 2006 is based upon the deficit reduction concept and reduction of current expenses share, gross income and other personal
income in the gross domestic product.
Gross income, other personal income and current expenses in 2006 are projected at the level of 390,26 mil.eur. Gross income and other personal
income share in the gross domestic product projected to 12,50 % is lower in comparison to the plan for 2005 which amounted to 12,92 %. Controlled
growth of income fund and relative decrease of its share in the gross domestic product represent the basic presumption for realization of stable public
expenditure financing concept and bringing down the budget deficit. During 2004 and 2005 the level of funds determined for financing income and
other personal income in the absolute amount remained unchanged, so in that period their participation in the gross domestic product was reduced by
almost one percentage point. The planned funds for income in 2006 increased, but their relatively lower share in the gross domestic product is maintained.
The increase is the result of implementation of reforms which required the new spending units constituting, implementation of reforms laws in the
part of increase of the range between coefficients, as well as increase of the minimum wage, which did not increase in the last years. Current expenses during
2005 are significantly lower in comparison to 2004. The amount of 170,36 mil.eur is projected for 2006 and in that way returned to the level from
2004. The reason for this increase is intention to settle, in 2006, outstanding liabilities of the state from the previous period regarding uncollected tax claims.
If the funds intended for compensation of accrued liabilities are exempted then the current expenses are at the level lower than planned for 2005.
Transfers are projected at the level of 333,20 mil.eur and intended for financing the rights in the field of social protection, as well as transfer for
the non-govrenmental organizations, institutions and individuals. Funds for social rights protection are mostly determined for the pension insurance
rights 159,13 mil.eur, health protection 58,16 mil.eur and realization of social program of the Republican budget 31,60 mil.eur, while 5,85 mil.eur is
determined for redundancies. Increase in transfers for social protection mostly appeared due to reserving funds which could be used for military pensions
payment in 2006, as well as for financing the military insurance holders health protection.
Capital expenses are planned to the amount of 61,79 mil. eur and the share in the gross domestic product for the next year is 3,51 %. Capital expenses
which will be realized from the Republican budget are planned to the amount of 35,08 mil.eur and they are intended for financing the infrastrucutre
of general importance, local infrastructure, construction facilities and equipment procurement. Expenses for infrastructure of general significance
are planned to the amount of 7,22 mil. eur and participate with 20,70 % in the total planned funds for capital expenses. Out of total planned
funds 4,00 mil.eur is determined for construction of road Podgorica - Kolašin, for public works programs 2,45 mil. eur i.e. for reconstruction of the
street Partizanski Put in Nikšić, border crossing Virpazar, road Risan - Dragulji and bridge Rasovo - Municipality of Bijelo Polje and 0,72 mil. eur for
regulation of water course in the Administartion for Water. Funds for local infrastructure are planned to the amount of 4,00 mil. eur, and they are related
to the reconstruction of the road for the settlement "Swedish houses" in Cetinje, reconstruction of road and promenade in Zabljak, reconstruction
of the town street in Bijelo Polje, reconstruction of the town roads in Niksic, Kotor, Berane, Danilovgrad and Mojkovac and local waterworks reconstruction.
Expenses for construction facilities are planned to the amount of 10,07 mil. eur and participate with 1,94 % in the total planned budget
funds in 2006. Capital expenses of the Health fund are planned to the amount of 2,76 mil. eur and the biggest part will be directed for information
system procurement. It is estimated that expenditure at the local governance level for these purposes would amount to 23,43 mil.eur and would
mostly be intended for construction and arrangement of local infrastructure.
2. BUDGET OF THE REPUBLIC O F MONTENEGRO FOR 2006
9

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Expenses of the budget for 2006 are projected to the amount of 518,91 mil. eur and they are balanced with the funding sources. Funding sources
- receipts in the part of current revenues are projected to the amount of 480,10 mil. eur, receipts from property selling to the amount of 7,00 mil. eur,
donations 5,50 mil. eur, funds transfered from the previous year - deposits which will be used 21,20 mil. eur and lendings and credits from foreign
sources 5,10 mil. eur. Projected deficit for 2006 amounts to 38,77 mil. eur including project loans to the amount of 12,00 mil. eur .
Current expenses,
transfers lending, debt
and guarantee
repayment 471,80
Capital expenses
47,07 mil.eur
Current revenues
471,80
Current expenses
surplus - 8,29
Deficit - 38,77
Projection of the Republic budget revenues for 2006 is performed on the basis of revenues realized in the previous years and in the first eight
months in 2005, estimated GDP growth, retail prices as well as the projected fiscal impact of the new regulations which will be applied in 2006. On
the basis of the given parameters budget current revenues of the Republic (without privatization proceeds, donations and lending and credits) in 2006
are projected to the amount of 480,10 mil. eur, what is an increase of 10,25 % in comparison to the budget rebalance in 2005. Planned increase in current
budget revenues is based on positive collection trends as regards VAT, corporate profit tax, excises which are paid in production and revenues
which will be provided by the spending units through their own activity. In addition,
net fiscal impact of new regulations application will provide for additional
revenues to the amount of 5,81 mil. eur. The biggest positive effect is expected regarding
Physical Persons Income Tax revenues due to the application of the Law on
Unified Registration and System of Reporting on Calculation and Collection of Taxes
and Contributions (3,5 mil. eur), as well as the Law on Amendments to the
Law on Excises (1,00 mil. eur).
Receipts of the Republic Budget for 2006 are projected to the amount of
518,92 mileur: current revenues to the amount of 480,10 mil. eur, receipts from property
selling to the amount of 7,00 mil. eur, donations 5,50 mil. eur, funds transferred
from the previous year-deposits which will be used 21,20 mil. eur and lending
and credits from foreign sources 5,10 mil. eur. Planned deficit for 2006 amounts
to 38,77 mil. eur, including project loans to the amount of 12,00 mil. eur.
Current revenues of the Republic budget are provided from taxes at the level of 424.59mil.eur, duties 10.55 mil.eur, compensations 10.83 mil.eur,
other revenues 34.12 mil.eur. Tax revenues show significantly faster growth dynamics than duties, compensations and other revenues. Projected current
revenues are 8,29 mil.eur higher than current expenses, transfers, lending and debt repayment. Funds surplus of 8,29 mil.eur together with the
projected deficit provides for 38,77 mil.eur and creates necessary space for capital expenses funding to the amount of 47,07 mil.eur.
Physical Persons Income Tax for 2006 is planned to the amount of 70,37 mil. eur, what is 7,28 % higher than the plan for 2005. In the period
January-September 2005 in comparison to the same period last year Physical Persons Income Tax collection increased, although there was a tax rate
reduction of 10% in comparison to 2004. The planned Physical Persons income tax increase in 2006 mostly relies on the estimated gross domestic product
growth and expected fiscal impact of the application of the new decisions envisaged by the Law on on Unified Registration and System of Reporting
on Calculation and Collection of Taxes and Contributions, in 2006.
Legal Persons Profit Tax is projected to the amount of 16,04 mil. eur. The plan for 2006 is 40 % lawer in comparison to the Profit Tax revenue
which was planned for 2005. Lower revenues estimate on this basis is consequence of Profit tax rate reduction from 17 % in 2005 to 9 % in
2006, as well as obligation of return of the Profit Tax paid in advance at a higher rate in 2005 to the amount of 1,8 mil.eur. Monthly assess of the
Legal Persons Profit Tax in 2006 is planned to the amount of 1,48 mil.eur, i.e. after the return of the overpaid profit tax the planned net inflow
amounts to 1,33 mil.eur.
10

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Property Tax, i.e. Real Estate Turnover Tax is planned to the amount of 2,45 mil. eur, what is 33,80 % higher than planned for 2005. Planned increase
is based on a positive trend of Property Tax collection during 2005. Real estate turnover tax belongs to the group of taxes on which the collection
measures can not influence, apart from delinquent debt because the tax payer himself decides upon his property and its turnover. Real estate turnover
tax revenue is the general purpose revenue and it is shared between the budget of the Republic (50 %) and municipality budget ( 50 %).
Value Added Tax is planned to the amount of 215,11 mil. eur, what is 13,88 % higher than planned for 2005. The plan is based on the positive VAT
collection trend in 2004 and 2005. During 2004 revenues on this basis were higher by 15,21% in comparison to 2003, i.e. they were higher by 7,84%
than planned.
Excizes 2 are planned at the level of 77,54 mil.eur, what is by 24 % higher than planned for 2005. Planned excizes increase is based on the application
of Decree on change of the manner of calculation and payment of excizes in the course of the tobacco products turnover with the Republic of
Serbia with positive effects of 3,5 mil.eur and data which show increasing trend of excize collection in 2005.
International Trade and Transactions Tax is planned to the amount of 39, 71 mil. eur., i.e. at the approximately same level as in 2005. Lower
level on this basis in comparison to 2004 is planned due to goods import increase from the Republic of Serbia for which customs duty is collected, as
well as due to several Agreements concluded regarding free trade with the surrounding countries by which the application of reduced tariff rates or
zero tariff rates are regulated. Decree on compensations for usage of roads in commodities transit procedures through the territory of Montenegro is
not valid from 2006.
Rule book on single classification of the accounts of the Republic budget, budgets of the extra-budgetary funds and budgets of municipalities brought about receipts structure change in 2005. Namely,
a part of excizes in the course of import was until now used by the Directorate for Roads Construction as revenue from its own activity, and in 2006 excizes represent Republic budget revenue.
11

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Other Republic Taxes are planned to the amount of 3,34 mil.eur, what
is by 7,39 % higher than planned for 2005, as result of positive trend in collection
of these revenues in 2005.
Planned revenues collection on the basis of duties in 2006 amount to 10,54
mil. eur, what is by 57,31 % higher than amount planned in 2005. The highest
level of revenues is planned on the basis of administrative taxes collection to the
amount of 8,64 mil.eur. Such high level of planned administrative taxes is the
result of application of the Rule book on single classification of the accounts of
the Republic budget, budgets of the extra-budgetary funds and budgets of municipalities.
Part of special purpose administrative taxes up to now belonged to
the Ministry of Interior and Customs Office as revenue from their own activity
and they are classified as revenues of the Republic budget in 2006 .
Planned compensations in 2006 amount to 10,83 mil. eur. The biggest
amount is planned in relation to compensations for natural resources usage
to the amount of 2,95 mil.eur, ecological compensations 1,80 mil. eur,
compensations for organization of games of chance 1,75 mil. eur and compensations
for roads 1,76 mil. eur.
Planned other revenues in 2006 amount to 34,12 mil. eur. The highest
participation in planned other revenues in 2006 is related to other revenues
to the amount of 21,46 mil.eur (tax claims collection from the previous period
15,77 mil. eur and other revenues to the amount of 5,69 mil.eur and fines
and dispossessed property interest to the amount of 7,96 mil.eur.
Property Selling Receipts are planned to the amount of 7,00 mil. eur
and will be used for the planned deficit funding in 2006.
Donations are planned to the amount of 5,50 mil. eur and consist of:
1) Macrofinancial assistance of the European Union to the amount of
4,5 mil.eur;
2) Funds of the Global fund for environment for the Skadar lake integrated
ecosystem management project to the amount of 0,099 mil.eur;
3) European Agency for Reconstruction funds for realization of drafting the
project of Penalty-reformatory facility construction to the amount of 0,90 mil.eur;
4) Funding of witness protection shelters, USA donations to the amount
of 0,004 mil.
According to the agreements signed with the World Bank, it is expected
in the next year to have inflow on the basis of approved credits for Pension
and Disability Insurance Fund reform, Education and Health system reform
to the amount of 5,11 mil.eur.
Project loans in 2006 are planned at the level of 12.000.000.00 eur, out
of which will be provided funding:
Delayed investment maintenance of road network .......2,00 mil.eur
- European Investment Bank
Tunnel Vrmac reconstruction .............................................2,00 mil.eur
- European Investment Bank
Regional roads reconstruction...... .....................................4,00 mil.eur
- European Bank for Reconstruction and Development
Seaside area sorroundings protection...............................1,00 mil.eur
- World Bank
Seaside water supply improvement ..................................2,00 mil.eur
- Credit Bank for Reconstruction and Development
Recycling center "Livade" Podgorica .................................1,00 mil.eur
- Government of Spain
12

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Expenses presented by the Law on Budget of the Republic of Montenegro for 2006 are planned to the amount of 518.91 eur. It is planned by the
budget to reduce the share of expenses in the gross domestic product. For 2006 it is planned that budget expenditures share in the gross domestic product
amount to 29,50 %, whereas it amounted to 30,62 % in 2005.
In the structure of total planned expenses the share of current expenses is the highest i.e. their participation is 51,29 % in the total budget planned
for 2006, while participation of transfers for social protection is 6,67%, transfers to institutions, individuals and non-governmental sector 23,55%, capital
expenses 6,76 %, debt repayment 7,42% and reserves 3,09%. During 2005, the biggest part of payments was made for liabilities which arose on the basis
of issued securities, so that in 2006, proportionally to the reduced liabilities, a lower level of funds for these purposes was planned. Privatization process
intensification also contributed to reduce needs in relation to crediting the big systems of the Government of the Republic of Montenegro, while
unemployed persons number reduction shows that the funds for small and medium-sized enterprizes funding in 2005 were used efficiently and that it
is necessary to renew the crediting cyclus, although to a smaller extent. The foreign project loans provided the funding sources in the part of strategic infrastructure
projects, so that capital expenses are envisaged to be lower than planned for 2005. Funds planned for capital expenses provide completion of
traffic infrastructure and adequate investment railway and roads maintenance. High social protection level is provided by the budget, as well as appropriate
transfers necessary to finance liabilities in the part of pension-disability insurance, health care and unemployment. Current expenses increased due
to planned increase in funds intended for employees' income and other personal income, while expenditures for material and services are at the lower
level than planned for 2005.
In the current expenses the gross income funds share is the biggest 61.36 % and expenditures for material and services 18.31 %. Gross income
and contributions funds, which represent burden for employers, are planned to the amount of 163.33 mil.eur, what is 31.47% of the total planned expenses
for 2006. Gross income and contributions funds, which represent burden for employers, are planned to finance income of 29.618 employees,
out of which the biggest part is intended for financing income (of 11.256 employees) within the elementary and secondary school education program.
In comparison to 2005 funds for gross income and employer`s contributions are higher by 3.66 mil eur or by 2.29%. Rationalization measures
enabled growth of gross income by 5.4% as regards all budget beneficiaries on the basis of planned increase in the minimum wage, starting from
January next year. Share of funds planned for gross income and contributions, which represent burden to employers, in the gross domestic product
have been constantly decreasing. In 2004 funds for gross income and contributions participated with 10,40% in the gross domestic product, in 2005
with 9,74 %, whereas in 2006 these expenses' share is 9,28% in GDP.
Expenditures for material and services are planned to the amount of 48.74 mileur and their participation in total planned expenses for 2006
are 9.31 %. The biggest part of funds is determined for the contracted services funding 52,20%, energy 15,96% and material 16,29%.
Funds planned for current maintenance amount to 19.11 mil.eur and the share in the total planned expenses is 3.68% for 2006. The biggest part
of funds is intended for public infrastructure maintenance to the amount of 16,22 mileur: 7.2 mileur for railway infrastructure maintenance and 9,00
mileur for current maintenance of road infrastructure.
Funds for interest rates are planned to the amount of 15.50 mileur and participate with 2.98% in the total planned budget expenses for 2006.
Funds are entirely intended for settlement of due liabilities in relation to foreign credits.
Subsidies are planned to the amount of 6.07 mileur, what is 1.17% of total planned expenses for the next year, and they are related to the subsidies
in agriculture, forestry and water supply, subsidies for energy, subsidies for veterinary medicine, subsidies for tourism.
Social protection rights are planned to the amount of 1.61 mileur and participate with 6,09% in the total planned expenses for 2006. Envisaged
funds are intended for realization of the program of child allowances, fighter-disability
protection, material security of families, care and assistance
by other persons, meals for children in nurseries.
• Realization of child allowances program to the amount of 2.72 mileur.
The program includes social protection of 15.835 beneficiaries in 8.235 families;
• Fighter-disability protection to the amount of 7.44 mileur for 7.967
beneficiaries;
• Material security to the amount of 9.25 mil. eur for 11.292 families
with 33.939 members;
• Maternity leaves to the amount of 6,28 mil. eur for about 5.700 beneficiaries;
• Care and assistance by other persons to the amount of 2.58 mileur for about 5.000 beneficiaries;
• Meals for children in nurseries to the amount of 0.50mileur;
• Inmates support to the amount of 2.50 mil eur;
• Other rights in the field of social protection to the amount of 0.32 mileur, which encompass priests insurance to the amount of 0.16mil. eur
and independent artists insurance to the amount of 0.16mileur.
Funds for redunduncies are planned to the amount of 3,00 mileur and participate with 0.58% in the total planned transfers for social protection.
Funds for these purposes are determined in accordance with the Decision on criteria and manner of usage of funds provided in order to partly
13

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
finance excersizing employees' rights who discontiued their work due
to technical-technological and other advancedments ("Official Gazette
of the Republic of Montenegro", No.14/92).
Transfers to institutions, individuals, non-governmental and
public sector are planned to the amount of 122.19 mil eur. Transfers for
these purposes participate with 23.55% in the total planned expenses for
2006. Transfers to public institutions are planned to the amount of 24.58
mileur and participate with 4.74% in the planned expenses of the budget
for 2006. These funds are intended for University financing to the amount
of 11.00mileur, Compensation Fund to the amount of 2.02 mileur, Public
Enterprize "National parks of Montenegro" to the amount of 0.40 mileur,
Institute for Public Health to the amount of 0.50 mileur etc. Funds for
transfers to non-governmental organizations, political parties, parties and
associations are planned to the amount of 3.12 mil.eur and participate
with 0.60% in the total planned expenses for 2006. Pursuant to the Law on
Political Parties Funding, 2.05 mileur from these funds is provided for political
parties financing. Transfers to individuals are planned to the amount
of 10.46 mileur what is 2.01% in the total planned expenses for 2006. These
are intended for special allowances to employees in the Army of Serbia
and Montenegro to the amount of 3.51 mileur, scholarships and benefits
to the best pupils and students to the amount of 2.01 mileur, compensations
for indemnity due to natural disasters to the amount of 0.60mileur
and compensations to persons imprisoned without foundation to the
amount of 0.25 mileur. Funds to the amount of 1 mileur are envisaged for
one-off assistance to families and persons, which are in social need, traffic
benefits for disabled persons and recreation of children from the poorest
families, whereas the funds to the amount of 2,4 mileur are envisaged pensions
for persons who are more than 65 years old and who live in the countryside.
Transfers to the Pension Disability Insurance Fund are planned to
the amount of 69.33 mileur and participate with 13.36 % in the total planned
funds for 2006. Transfers to the Health Fund are planned to the amount
of 7.05 and intended for unemployed persons health protection funding
(3.73 mileur), health protection of internally displaced persons and
refugees (2.00 mileur) and capital expenses funding (1.32 mileur). Transfers
to Employment Bureau to the amount of 5.57 mileur are planned for
funding fhe income and other personal income of trainees and compensations
to unemployed persons. Transfers to the municipalities are planned
to the amount of 1.83 mileur, and intended for compensations for natural
disaster damages, inspection control activities in the field of civil engeneering
and conditional subsidies. Transfers to public enterprises to the amount
of 0.24 mileur are planned as compensation for damage to the public
enterprises in relation to natural disasters.
8%
7%
23%
Borakoinvalidskazaštita
12%
Funds for capital expenses are planned to the amount of
35.08mileur and participate with 6.76%in the total planned funds for
the next year. Expenses for general significance infrastructure are planned
to the amount of 7.22 mileur and participate with 20,47% in the
total planned funds for capital expenses. Funds for local infrastructure
are planned to the amount of 4.01 mileur, while expenses for construction
facilities are planned to the amount of 10.07 mileur and participate
with 1.94% in the total planned budget funds in 2006. Expenses for
equipment are planned to the amount of 7.14mileur, expenses for investment
maintenance to the amount of 6.02 mileur and expenses for
stock are planned to the amount of 0.62 mileur.
Lending and credits are planned to the amount of 6.32 mileur
and participate with 1.15% in the total planned expenditures in the
next year. Lending and credits to non-financial institutions are planned
to the amount of 3.00 mileur, students` credits 1.5 mileur and credits
for small and medium sized enterprizes 1. 82 mileur.
Funds for debt repayment are planned to the amount of 12.03 mileur,
and are intended for:
• credit and securities repayment to residents to the amount of
5.00 mileur
• credit and securities repayment to non-residents to the amount
of 7.03 mileur to: World Bank (IBRD) - 6.10 mileur; Council of Europe
0.50 mileur and Paris Club 0.40mileur.
Funds for guarantee repayment are planned to the amount of 2,00
14

Budget for 2006
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
mileur, out of which 1.00mileur is planned
for given guarantees repayment in country
and 1.00 mileur for guarantee repayment
abroad.
Funds for previous years liabilities repayment
are planned to the amount of 24,47
mileur, out of which 8,7 mileur is intended
for old foreign exchange savings repayment
and 15,77 mileur for unsettled liabilities repayment
of the budget beneficiaries from
the previous years. Liabilities repayment
from the last years will be financed from the
collected tax claims from the previous years.
Reserves funds are planned to the amount
of 16.03mileur what is 3.09% of the total planned
expenses. Current budget reserves funds
are planned to the amount of 11.03 mileur and
will be used for urgent and contingent expenses
over the year. A part of current reserves funds
to the amount of 1.21 mileur, will be used for
potential income increase funding, if the Law
on income and other salaries of members of
parliament and officials would be applied. Permanent
budget reserves funds, to the amount
of 5,00 mileur, are planned to cover costs of referendum
and parliamentary elections organization
in the next year.
Budget deficit and net credit repayment
in 2006 will be funded by privatization proceeds
to the amount of 7,00 mil.eur, donations
to the amount of 5,50 mil. eur and by
reducing deposits to the amount of 21,20 mil.
eur. Deficit reduced by old foreign exchange
savings amounts to 18,07 mil. eur and participates
with 1,02 % in GDP, i.e. following the
increase amount of project loans the deficit
share in GDP amounts to 1,71 %, what is in
accordance with the goals set in the arrangement
with the International Monetary Fund.
Economic policy of the Government of the
Republic of Montenegro as well as the objectives
determined by the Agenda of Economic Reforms
are directed towards further Gross Domestic
Product growth, increase in employment
in the real sector and employment cut in
the public sector, balance of payments improvement,
creation of stable macroeconomic framework
and conditions for foreign investments,
reduction of public expenditure deficit
and its share in the Gross Domestic Product,
recognition of private ownership and entrepreneurship
economy in real sector. Economic
policy of the Government and objectives from
the Agenda of Economic Reforms determined
the budget structure for 2006 and allocation of
funds in the public expenditure sectors. Budget
expenditure implementation in 2006 is structured
in accordance with the set objectives
Budget Department
15

Consolidated public spending
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Consolidated
public spending in
Montenegro in the
period I - XII 2005
Reports on consolidated public spending are made in accordance with
the budgetary system, based on which the records on public spending
are planned, shown and approved according to the system of the cash
flows.
Consolidated public spending in the period January- December 2005, is
realized to the amount of 761,94 mil.eur. Realized level of public spending is
financed from the taxes to the amount of 430,68 mil.eur, duties 14,02 mil.eur,
contributions 205,38 mil.eur, yields on capital 4,97 mil.eur and other revenues
- deposits 59,30 mil.eur. Total level of revenues was 26,08 mil.eur lower than
the realized spending, therefore the missing funds were provided through deficit
financing.
In the same period tax revenues were planned to the amount of 423,63
mil.eur, duty revenues 14,04 mil.eur, revenues from contributions 199,11
mil.eur, yields on capital 3,26 and other revenues to the amount of 70,99
mil.eur.
Realized amounts, when compared to planned amounts show that in
2005, revenues from taxes, contributions and yield on capital were realized to
the amount higher than planned, while the revenues from duties and other revenues
are realized to the amount lower than planned.
Consolidated deficit of public spending for 2005, was planned to the amount
of 53,29 mil.eur and is realized to the amount of 47,58 mil.eur (with project
loans). Deficit is lower than planned and was realized in the Budget of the
Government to the amount of 51,91 mil. eur, Pension and Disability Insurance
Fund to the amount of 2,45 mil.eur and Employment Agency 2,99 mil.eur while
the Republic Health Insurance Fund realized the surplus to the amount of
4,69 mil. eur and local self-government to the amount of 5,08 mil. eur.
During 2005, financing policy significantly derogates from the plan. High
level of privatization revenues and lower level of deficit allowed settlement of
debt based on credits and issued securities to the amount of 114,06 mil.eur, repayment
of the capital amount on foreign credits to the amount of 5,53
mil.eur and deficit financing of 47,58 mil.eur.
Consolidated deposit after 12 months of 2005, is estimated to the level of
44,06 mil.eur.
Stanko Jeknic, Ph.D.
Slobodanka Labus, Snežana Mugoša,
Radovan Živković
1. BUDGET OF THE REPUBLIC
Expenditure of the Budget of the Republic in the
year of 2005, is realized to the amount of 427,50
mil.eur, or with paid transfers of 53,71 mil.eur expenditure
amounts 481,21 mil.eur. Expenditure of
the Budget of the Republic is financed from taxes to
the amount of 394,76 mil.eur, duties 3,74 mil.eur,
yields on capital 4,97 mil.eur and other revenues
22,75 mil.eur. Total level of revenues was 51,91
mil.eur lower than realized expenditure and missing
funds were financed from revenues from privatisation
and from donations.
In the same period tax revenues are planned to
the amount of 384,73 mil.eur, revenues form duties
1 - Data on consolidated public spending for 2005 are preliminary, and for the local self-government evaluated.
16

Consolidated public spending
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
6,70 mil.eur, yields on capital 3,06 mil.eur and other revenues to the amount
of 40,95 mil.eur.
Realized amounts, when compared to planned show that, in the year
2005, revenues from taxes, duties and yield on capital were realized to the
2005. However, the lower level of paid transfers by the Budget of the Republic
and realized revenues caused the need for the funds needed for payment of liabilities
to be provided by deficit financing to the amount of 2,45 mil.eur. Missing
funds were provided from privatization revenues to the amount of 19,97
mil.eur , which is higher than the amount needed for deficit financing. This
balance of 17,53 mil.eur was used for the payment of liabilities of the Fund based
on taken credits and payment of liabilities from the previous period.
amount higher than planned, while other revenues were realized to the amount
lower than planned.
Deficit of the Budget of the Republic (with project loans) in the year 2005,
was planned to the amount of 55,86 mil.eur, however, it was realized to the level
of 51,91 mil. eur and financed from revenues from privatization and donations.
Deposit of the Budget of the Republic after 12 months of 2005, is estimated
to the level of 37,31 mil.eur.
Expenditures were realized at higher level than planned for 2005. These
derogations were caused, above all, by increase of expenditures for payment of
call in arrears, interests and other expenditures.
2. PENSION AND DISABILITY INSURANCE FUND
Spending of the Pension and Disability Insurance Fund in 2005, was realized
to the amount of 152,32 mil.eur, or with paid transfers of 20,01 mil.eur
spending amounts 172,33 mil.eur. Spending of the Fund was financed from
contributions to the amount of 118,31 mil.eur, other revenues 7,43 mil.eur
and transfers from the Budget of the Republic 44,14 mil.eur. The total level of
receipts was 2,45 mil.eur lower than realized spending and missing funds were
financed from privatization revenues and with the deposit reduction.
In this period revenues were planned from contributions to the amount
of 115,05 mil.eur, other revenues 1,50 mil.eur and transfers from the Budget of
the Republic 61,00 mil.eur. Realized amounts when compared to planned
show that in the year 2005, receipts of the Pension and Disability Insurance
Fund were realized to the amount lower than planned.
Deficit for the Pension and Disability Insurance Fund was not planned in
3. HEALTH INSURANCE FUND
Funds paid for health care, which was financed through the Health Insurance
Fund amount for the year 2005, 101,58 mil.eur. Spending of the Fund is
financed from contributions to the amount of 79,40 mil.eur, transfers from
the Budget of the Republic 5,89 mil.eur, transfers of the Pension and Disability
Insurance Fund 20,01 mil.eur and transfers of the Employment Agency 0,10
mil.eur.
In this period revenues from contributions were planned to the amount
of 76,04 mil.eur, other revenues 1,60 mil.eur and transfers 31,53 mil.eur. Realized
amounts when compared to planned show that, in 2005, receipts of the
17

Consolidated public spending
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Health Insurance Fund were realized to the amount higher than planned (higher
amount of collected contributions for health insurance).
It is estimated that the Health Insurance Fund realized surplus of 4,69 mil.
eur in 2005, as a result of the reform implementation in the sphere of health
care spending of this sector was rationalized, and the number of services provided
outside of Montenegro was reduced through the improvement of quality
and efficiency of the health care system in Montenegro.
4. EMPLOYMENT AGENCY
Assets paid for the financing of liabilities of the Employment Agency in
5,08 mil. eur and is used for the financing of the payment of domestic debt.
2005, amount 18,86 mil.eur, or with paid transfers 22,09 mil.eur. Liabilities of
the Employment Agency were financed from contributions to the amount of
7,67 mil.eur, other revenues 3,82 mil.eur and transfers form the Budget of the
Republic 3,23 mil.eur. The total level of receipts is 2,99 mil.eur lower than realized
spending and missing funds were financed from revenues from privatization
and donations. In this period revenues were planned from contributions
to the amount of 8,02 mil.eur, other revenues 4,60 mil.eur and transfers
from the Budget of the Republic 5,00 mil.eur. Realized amounts when compared
to planned show that, receipts of the Employment Agency were realized to
the amount lower than planned in 2005.
Deficit of the Employment Agency was not planned in the year 2005. Payment
of credits for self-employment, lower level of paid transfers by the Budget
of Republic, and of the realized revenues, created the need for funds to be
provided for the payment of liabilities of the Fund by the deficit financing to
the amount of 2,99 mil.eur.
5. LOCAL SELF-GOVERNMENT
Funds for financing of the activity of the local self-government in 2005,
amount 61,68 mil.eur. Spending was financed from taxes to the amount of
35,92 mil.eur, transfers from the Budget of the Republic 0,45 mil.eur, duties
5,94 mil.eur and other revenues 24,45 mil.eur.
In this period revenues are planned from taxes to the amount of 38,90
mil.eur, duties 6,13 mil.eur and other revenues 22,34 mil.eur. Realized amounts
when compared to planned show that, in the first half year 2005, receipts
in local self-government were realized to the amount lower than planned.
In 2005, surplus of the local self-government was estimated at the level of
EVALUATION OF THE STATE
• Consolidated public spending in 2005, was realized to the amount of
761,94 mil.eur. Realized level of public spending was financed from taxes to the
amount of 430,68 mil.eur, duties 14,02 mil.eur, contributions 205,38 mil.eur,
yields on capital 4,97 mil.eur and other revenues 59,30 mil.eur. Tax revenues,
revenues from contributions and yields on capital are higher than planned,
while revenues from duties and other revenues were realized to the amount
lower than planned. High level of collection of tax revenues determine value
added tax and profit tax, whose monthly disbursement rate indicates continuously
higher level from the one projected by the plan of the budget.
• Consolidated deficit of public spending with project loans in 2005, was
realized to the amount of 47,58 mil. eur. And is higher than planned ( 53,29
mil. eur ). Deficit was realized with the Budget of the Republic to the amount
of 51,91 mil. eur, Pension and Disability Insurance Fund to the amount of 2,45
mil. eur and Employment Agency 2,99 mil. eur while the Health Insurance
Fund realized surplus of 4,69 mil. eur and local self-government of 5,08 mil.
eur . Public spending policy in 2005, had as objective priority financing of liabilities
based on national debt, rationalization of public spending and efficient
tax collection.
• High level of privatization revenues allowed settlement of liabilities based
on credits and securities issue to the amount of 114,06 mil.eur, repayment
of the capital sum on foreign credits to the amount of 5,53 mil.eur and deficit
financing of 47,58 mil.eur. Lower level of payments based on current expenditures
shows that expenses were rationalized in real terms.
DEPARTMENT FOR MACROECONOMIC
ANALYSIS AND
COOPERATION WITH
INTERNATIONAL INSTITUTIONS
Stanko Jeknić, Ph.D.
Radovan Živković, Slobodanka Labus, Snežana Mugoša
Phone: 081-248-512
e-mail: mf@mn.yu
18

Capital Budget making
Capital budget
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Law Amending and Supplementing the
Budget Law, which was adopted in November
2005, provides for making a capital
budget apart from the current budget.
The capital budget is described under the Law
as a program related to a period longer than
a year, by which non-financial assets value is
increased and which includes acquiring of
nation-wide or local infrastructure, buildings,
land and equipment. It is envisaged
that the budget includes current and capital
budget disclosing expenditures and revenues
as per their sources of origin, while capital expenditures
shall include procurement and investment
maintenance of financial and nonfinancial
assets. In addition to this, only capital
budget may be financed from long-term
borrowings and securities.
A spending unit, in the budget planning
process, submits a special request for the capital
budget to the Ministry of Finance. General
part of the Republic Budget Law, under
Article 12, contains assessment of revenues
and expenditures disclosed according to economic
and functional classification for the
current and capital budget.
Capital budget projects funds for capital
projects, which imply special construction operations
with respect to costs and duration of
the construction works to be performed. The
capital projects include construction of new facilities
or important, long-term works aimed at
renovating and improving existing facilities,
which are funded from the capital budgets i.e.
funds earmarked for capital purposes. Capital
transfers financed from the capital budget are
also considered capital projects.
Capital projects are usually huge transfers
which imply long term financing with duration/useful
life of more than five years. They
are based on overall evaluation of needs and
they meet basic public needs and require a
public report on used funds. Given that capital
projects often involve long-term funding,
it is necessary to project amount of a borrowing
through loans, bonds or long-term credits.
The capital projects may also be co-financed
from the donors' funds.
Due to complexity and time needed for
taking projects into consideration, the capital
budget processes should start prior to other
segments of annual budgetary cycle. Prior to
making a capital budget, the Government
should set priorities on the basis of strategic
development guidelines defined under the
Economic Reform Agenda.
It is very important to point to correlation
between items under the capital and
current budget. Procurement of capital resources,
either through their construction or
acquisition, will require current budgets' assistance
so that such resources could be maintained
and adequately supported. Therefore,
it is necessary to assess operating and maintenance
costs, including effects that such
project will have on the current budgets,
including number of hired workers and amount
of their salaries, repair works on the building,
replacements and maintenance.
CAPITAL PROJECTS ARE CLASSIFIED AS
FOLLOWS:
• Maintenance Projects - relating to
maintenance, preservation and prolongation
of the useful life of the assets, with no aim to
make significant changes on use of facilities
and assets.
• Program-related Projects - are aimed
at achieving the program objectives such as
alteration or improvement of the existing
premises which is required by a new program
or provision of a new facility or assets by construction
or acquisition.
• Transfers - provide capital funds to
authorities at lower level.
All projects requiring funding from capital
budget must be classified into one of the
following four categories:
• Acquisition- includes purchase of a
land, with any development measures to be
undertaken on the bought land.
• New construction - project for new
construction is a complete undertaking
which includes construction of one or more
facilities. The project includes all necessary
works for construction of a purpose-serving
and new facility and its putting into use, installed
equipment which thus became integral
part of the facility and development and
improvement measures on the site.
• Improvement - includes any work required
for comprehensive and usable changes
to be performed on the existing facility or
building, as well as any other technical services,
installation of fixed equipment which is
a part of the facility or building and development
of the construction land.
• Equipment - is a material property of
permanent or long-term nature, which is
used in operations and activities and which is
an integral part of the facility.
A successful capital program starts with a
Liljana Crnčević
coordinated and long-term planning based on
national strategies and evaluation of resources
and needs of a country. Based on evaluation of
resources and their condition, Government
may produce a list of priorities concerning
long-term capital needs. Long-term planning
of capital projects should be done six to ten
years before approval and funding of a project.
Medium-term planning is done five years
prior to expected project approval and funding.
Results of medium term analysis are published
under a Plan for Capital Improvement
adopted by the Government. The Capital Improvement
Plan is an important document
for making a decision on projects to be included
in the annual Budget Law, representing a
five-year plan concerning national capital priorities,
which is available to the public. As regards
the medium-term planning, projects listed
under the plan may differ from a longterm
plan due to changes of circumstances or
priorities, or because of cancellation, merging
or defining of new projects.
The Ministry of Finance is planning to
embark on the capital budget implementation
process in 2006. Given the huge scope of
the work, we plan to make a capital budget
for the Public Works Directorate and Directorate
for Highways for next year. We also plan
to issue Instructions on Preparation of the
Capital Budget, which will contain ways and
forms used for preparation of a capital budget
request, classification of capital budget
projects, forms used for reporting on completion
of a project etc.
PUBLIC INVESTMENT PLANNING UNIT,
BUDGET SECTOR
INDEPENDENT ADVISOR I
Ljiljana Crnčević
Phone. 081 225 266
e-mail: mf@mn.yu
19

Banking sector privatizacion
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Banking sector
privatizacion in 2005
Ownership structure of stock capital in banks
Milorad Katnić, M.A.
INTRODUCTION
Reform of the entire banking system of
Montenegro is, first of all, directed towards establishment
of safety and stability as well as
increase in the banking system efficiency and
profitability.
The corner stone of monetary reform was
established by the introduction of Deutsche
Mark (November 1999), later on Euro (January
2002) as legal tender and by establishment
of the Central Bank of Montenegro (November
2000). Euro introduction had significant implications
on Montenegrin economy. Trade and
investment developments became more simple,
easy and with less transaction costs.
Fast reform brought about significant results:
new legislative regulative adoption, implementation
of the ownership transformation,
new bank management concept adoption,
bank products offer increase. Adoption of
the Law on Leasing, Law on Amendments and
Supplements to the Law on Protection of Deposits,
Law on Bill of Exchange, during 2005,
additionally contributed to complete the set of
legislative regulations which regulate this area.
BANKING SEKTOR AT THE END OF 2004
Ten banks operate within the banking system
of Montenegro: Montenegrin Commercial
Bank, Montenegrobanka, Podgorička Bank, Atlasmont
Bank, Euromarket Bank, Opportunity
Bank, Hipotekarna Bank, Commercial Bank
Budva, Nikšićka Bank and Pljevaljska Bank.
In the total capital structure in the banking
sector at the end of 2004 the total share realized
by the state was 25.76%, private capital
36.35%, and the share of capital from foreign
sources was 37.89% .
As for the ownership structure of stock capital
in banks at the end of 2004, the state-owned
share is dominant in Podgoricka and Niksicka
Bank, and it is significantly present in Pljevaljska,
Atlasmont and Hipotekarna Bank .
PRIVATIZTION OF BANKING SECTOR
IN 2005
At the beginning of 2005, 75% of the Montenegrin
banking sector was in private ownership
and already then significant results of restructuring
and rehabilitation of this sector were
seen. Privatization plan for 2005 envisaged finalization
of activities regarding privatization of
Podgoricka Bank. By the Decisions of the Council
for Privatization and the Government of the
Republic of Montenegro the manner and procedure
of the state-owned shares package sale
was defined in Pljevaljska and Niksicka Bank
(Council's Decisions from September 14, 2005)
and in Hipotekarna and Atlasmont Bank (Conclusion
of the Government of the Republic of
Montenegro from September 15, 2005)
Podgoricka and Atlasmont Bank privatization
was finished until the end of 2005, whereas
completion of privatization of Pljevaljska
Bank and Niksicka Bank is envisaged for the
first half of 2006.
PRIVATIZATION OF PODGORICKA
BANK A.D.
Council for Privatization adopted the Decision
on Initiation of Privatization Procedure of
Source: Central Bank of Montenegro
"Podgorička Bank" a.d., Podgorica, in November
2005, by selling majority shares package owned
by the state by means of an international tender.
Given the planned activities volume and significance
of privatization of Podgoricka Bank, the
Commission for privatization in the banking sector
stated the need of a financial advisor engagement
and in accordance with that the top-rated
company IAAG Consultoria &Corporate Finance
SA from Spain was chosen by the tender.
On proposal of the financial advisor, the
Decision on Public Invitation for Bids to express
interest for majority share package purchase
in privatization of Podgoricka Bank a.d.
Podgorica was made on May 11, 2005. Written
applications were submitted within the deadline
by the following companies: Société Générale,
Paris and Steiermärkische Bank und Sparkassen
AG, Grac. Then the Public Invitation for
Bids for majority share package sale of "Podgorička
Bank" a.d. - was announced in June 2005,
both in domestic and foreign magazines. One
Bid was submitted within the deadline by the
company Société Générale, Paris.
As it was concluded that Société Générale
met all the necessary conditions envisaged by
the bid, the Agreement on Purchase-Sale of
Shares was signed in October. Thus, 64,4% of
the state-owned shares was sold at the price of
385 eur per share. Nominal price of shares was
255,65 eur per share, and average trading price
in stock exchanges in October amounted to
249,32 eur per share . In addition, by the Agreement
on Purchase-Sale of the Company, it
bound itself, inter alia, to invest into the Bank
1 - Structure of ownership of the total capital in comparison to the end 2003 has not been significantly changed.
2 - Significant participation of the state in Pljevaljska, Niksicka and Hipotekarna Bank is also through indirect ownership i.e. through enterprises in which the state is majority owner
20

Banking sector privatizacion
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
another 40 mil. Eur until 2008. Tradition, reputation
and rating of Société Générale in the
world , say enough about the significance and
benefits of getting this company as strategic
partner as well as that Montenegro became
stable and attractive market, interesting, in
particular, for investments in the financial sector,
even for the biggest world companies.
ATLASMONT BANK A.D. PRIVATIZATION
Republic of Montenegro became owner of
19,19% of Atlasmont Bank stock capital by taking
over the shares which were under the
ownership of the Agency for Recovery, Liquidation
and Bankruptcy of Banks from Belgrade.
Pursuant to the Conclusion made by the Government
of the Republic of Montenegro - the
Ministry of Finance started stock exchange sale
of the minority shares package of Atlasmont
Bank. Following the implemented activities necesary
for shares sale preparation in the stock
exchange, the Ministry of Finance offered for
sale 2.620 shares on September 26, 2005 at the
price of 500 eur per share, what represented
nominal value of share. After the stock exchange
auction the best offer was given by HLT
Fund. Atlasmont Bank shares were sold at the
price of 770 eur per share, what represented
the total value of the state-owned shares package
of 2.017.400 eur. The whole amount was
paid by the bonds of old foreign exchange savings.
HIPOTEKARNA BANK A.D.
PRIVATIZATION
State-owned shares package sale in Hipotekarna
Bank a.d. was determined in the similar
way as in relation to the Atlasmont Bank, i.e. by
means of stock exchange sale. The Ministry of
Finance offered 1.020 shares of Hipotekarna
Bank a.d. for sale on November 7, 2005 what
represents 3.8776% of stock capital at the price
of 511.29 eur per share. Sale process is still underway.
Interest of foreign partners for majority
ownership of this Bank and prices at which
the shares have circulated in the free market
point to the founded expectation that the state-owned
shares will be sold soon.
PLJEVALJSKA BANK A.D. PRIVATIZATION
The Government of the Republic of Montenegro
became the owner of 56.38% of Pljevaljska
Bank a.d. Pljevlja by the decision made as
regards debtor-creditor relations with the Coal
Mine a.d. Pljevlja. Aiming at completion of the
Bojana Bošković
banking sector privatization process, the Council
for Privatization made the decision to privatize
the bank by means of the International Public
Tender. Taking into account the size of the
Bank and volume of activities necessary to be
performed, it was decided to appoint the Experts
Team formed of the representatives of the
Central Bank of Montenegro, Ministry of Finance,
Development Fund, Institute for Strategic
Prognosis and Pljevaljska Bank to perform
the financial advisor's activity. The Experts Team
prepared all documentation envisaged by
legal regulations within the envisaged deadline.
The prepared material was adopted at the Tender
Commission session and on December 2,
2005 the Public Invitation for Bids was announced
for sale of 78.72% of state-owned
shares and shares owned by the state funds .
Deadline for conclusion of the tender is March
2, 2006 at 15:00h. Pljevaljska Bank privatization
procedure completion is planned for the first
quarter of 2006.
NIKŠIĆKA BANK A.D. PRIVATIZATION
By the beginning of 2006 the Government
of the Republic of Montenegro and the Council
for Privatization will define in detail the
manner and models for Niksicka Bank privatization.
In that part, the Ministry of Finance
sent an iniciative to the Electro-distribution
Company of Montenegro, which has got a significant
share in the Nikšićka Bank ownership,
to start the privatization process jointly, in order
to sell the majority shares package to a
strategic partner which would meet the set
conditions in the procedure.
INSTEAD OF CONCLUSION
One of the objectives defined by the Economic
Reforms Agenda reads as folllows: "Building
a stable financial system in the private
ownership, completely integrated into the international
structures, which offers safe and
stable return of depositors' deposits and real
capital prices for borrowers."
At the end of 2005 legal infrastructure was
completed, and its changes are in accordance
with the financial system development needs.
90% of banking system is already in private
ownership, and privatization of the Niksicka
Bank and completion activities of the Pljevaljska
Bank privatization are planned to take place
in the first quarter of 2006. In this way the
whole banking sector will be in private ownership.
Change of the ownership structure of the
banking sector offers additional guarantees for
growth of money offer, competition and efficiency
of banks.
The newest statistical data on developments
within the banking sector, primarily on
citizens' deposits growth, show that citizens'
confidence into banking sector has been significanlty
regained. This is especially significant
given the negative experience with savings in
"pyramidal" banks from the last decade. Confidence
in the economic perspective of Montenegro
and stable financial system is confirmed
also by Hypo Alpe Adria Bank registration,
which got working permit in late 2005, as well
as by efforts made by other financial institutions
to become participants in the Montenegrin
banking market through privatization of
the remaining part of the state capital or
green-field investments.
Significant economic developments in relation
to the macroeconomic stability establishment,
creation of competitive institutional
ambience, through demonopolization, liberalization
and business barriers removal,
what is followed by great direct foreign investments
growth, additionally provide for safety
and stability of the banking sector, which consequently
represents the accelerator of the faster
economic growth.
ASSISTANT MINISTER, M.A.Milorad Katnić
ADVISOR, Bojana Bošković
Phone: 081-245-589, 224-248
e-mail: mf@mn.yu
3 - Directly upon the privatization process, the state share in the ownership structure of Podgoricka Bank amounted to 55,64%, and Pension and Disability Fund 4,14%. Pursuant to the agreement
with the IFC the state exchanged 10% of its ownership for the old debts, in which way the Podgoricka Bank got International Finance Corporation as strategic partner. At the same time,
the Ministry of Finance started the procedure of exchange of old debts which were hard to be collected from the companies (mainly and dominantly state-owned), which owned the Podgoricka
Bank shares in the portfolio. Thus, the state ownership in Podgoricka Bank increased by 15% or 4.364 shares, and debt to the amount of 1.115.656,60 eur was converted. By the sale of total
state-owned shares package in Podgoricka Bank at price of 385 eur per share, capital profit was realized to the amount of 546.438,40 eur for the shares package acquired by debt conversion.
Furthermore, over one million Euro debts, which dominantly belonged to the category of hardly recoverable debts, were completely collected in this way.
4 - Société Générale started its operation in the banking domain on May 4, 1864. Therefore, it has got banking experience of over 141 year. It has been present in the region since 1998 in Romania,
Bulgaria, Czech Republic, Slovenia and Serbia. Société Générale Group, which includes banking, specialized funding, broker operations, management portfolio, real estate and insurance,
is doing business at the local level in the area of 45 countries all over the world.
5 - All legal persons are entitled to participate in the tender, regardless of type and form of organization, who can provide evidence for meeting conditions to have total revenues from operations
realized in the last three years in the amount not less than, in average, 5 million EUR annually. Physical persons are also entitled to participate in the tender, which apart from the general
conditions, must provide evidence to be financially able to make payments for the shares at the price offered in the tender procedure, without debts contracted from the exeternal sources.
21

Credit rating Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Credit rating Montenegro
Vladimir Kavarić, M.A.
Montenegro successfully performed
its first annual revision of credit rating
by the agency Standard and
Poors (S&P). Already in its first year credit rating
evaluation is improved, from BB stable
to BB positive. Analysts of S&P, which visited
Montenegro in November 2005, state that
the improvement was based on the successful
political and economic reforms, and on the
strengthening of the macroeconomic stability.
Privatization in the most important economic
sectors and the reduction of the share
of public debt in the GDP (to about 44%) is
emphasized. Having in mind recognized movements
analysts of the agency Standard and
Poors expect continuation of the implementation
of reforms, which will be effectuated
through the growth of GDP from 4% to 5% a
year, and the further investment swing,
downsizing of administration, reduction of
the budgetary deficit (to less than 2%) and
improvement of the business environment.
Strong political support to the Stabilization
and Association Process was also positively
evaluated. Analysts of the Standard and Poors
Agency expect, which was explicitly stated in
the report, that holding a referendum and
the forthcoming independence will not affect
political and economic stability.
Improvement of the credit rating in this
year, as a very positive event in for the further
positioning of Montenegro at the international
financial market, has also additional
positive elements. Namely, it is realized
only a year after the initial rating is received,
which represents the announcement of its
further corrections and improvements. Furthermore,
it is of special importance that the
improvement came in the year before the referendum.
It is known that the period of large
strategic political decisions is not suitable
for the implementation of reforms and that
economic matters in these situations usually
become less important because of solving of
political dilemmas. However, that did not
happen in Montenegro. Only few months
before the expression of the citizens will
about the independence of Montenegro, improvements
in all segments of implementation
of reforms are noticed.
Credit rating evaluations of some of the
countries to which Montenegro could be
compared to, could be used for better consideration
of the achieved results. For instance,
Montenegro is better rated than Serbia,
Ukraine and Turkey, which have rating BB-.
Macedonia has rating BB+, while ratings of
Hungary (BBB-), Russia (BBB-), Bulgaria
(BBB) and Croatia (BBB) are somewhat better.
It is very important here to mention that
those are all countries that are for many years
now (2 to 8 years) at the credit list of the
Standard and Poors Agency. The official information
on rating of Montenegro can be
found at the web site of the Agency
(www.standardandpoors.com).
Regardless of, now rather well recognized
importance of credit rating, we should specify
its basic performance. What does credit
rating mean for Montenegro Credit rating
and improvement of its performance undoubtedly
help further establishment of
Montenegrin position at the international
financial market. National Borrowing under
more favorable conditions becomes possible.
The country becomes more attractive for inflow
of long-term capital into private and
public companies, banks and other financial
institutions. Namely, with the estimation of
credit rating of the country, investment risks
become more transparent. Furthermore, credit
rating provides us with analytical instrument
for precise recognition, both positive
and negative movements. Diversity of the
methodology for calculations of credit rating
provides exceptional corrective factor for
conducting of economic policy.
This type of credit rating is especially important
because it represents independent
opinion. Foreign investors get information on
Montenegro from the source they find neutral.
Standard and Poors Agency, which in its
report gives unambiguous support to all that
is done by now, is surely one of the most reputable
and credible institutions in the world for
evaluation of economic accomplishments in
one country. However, these reports get their
full meaning only if the trends recognized during
last years continue. Creating a stable business
environment with low level of transaction
costs, reduction of taxes, stable public finances
based on the reduced public spending and
budgetary deficit are the basic priorities.
SECRETARY OF THE
MINISTRY OF FINANCE
Vladimir Kavaric
Phone: 081-225-910
E-mail: mf@mn.yu
22

Outline of the Customs Tariff Law
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Outline of the
Customs Tariff Law
At the third meeting of its second regular
session, held on December 6, 2005, the Parliament
of the Republic of Montenegro adopted
the Customs Tariff Law", which is to be
applicable as of January 1, 2006. Decree on
Customs Tariff ceased to exist as of the day of
implementation of the Law ("Official Gazette
RoM", No. 47/03 and 25/05).
One of the main reasons for adoption of
the Customs Tariff Law is caused by a need to
harmonize the national customs tariff with
the EU Combined tariff, particular with respect
to its nomenclature. EU Combined tariff
is based on the International Convention on
the Harmonized Commodity Description and
Coding System ("Official Gazette FRY- International
Agreements", No.6/87, 14/91 and
1/97), which was also signed by our country,
thus obliging us to incorporate any change in
the updated HS Nomenclature into our customs
tariff.
Harmonization of the regulations relating
to the customs nomenclature is also required
for the purpose of intensifying foreign trade
exchange with the EU member states, and for
meeting one of the prerequisites for the accession
of our country to the World Trade Organization.
Application of the EU Combined Nomenclature
enables uniform commodity coding,
description and classification, including electronic
processing, which contributes to further
modernization of the customs system and
speeds up customs procedure. Harmonization
of the national customs tariff with the
EU Combined Nomenclature will significantly
simplify the implementation of the Free Trade
Agreements, because the countries with
which such agreements are concluded, have
mostly harmonized their nomenclatures with
the EU Combined Nomenclature.
New Customs tariff is based on the Harmonized
System (HS-2002), which represents
a universal classification system that is used
in the process of customs tariffs determining.
Each product, as a foreign trade exchange
item, is assigned a 10-digit unique identification
code of which the first six digits represent
Harmonized System (stipulated by the World
Customs Organization), seventh and eighth
digit of the tariff code are taken from the EU
Combined Nomenclature and are unique for
all EU member states and other countries that
took this nomenclature, including our country.
The ninth and tenth digit of the tariff code
varies from country to country and the
countries use them for their local nomenclature
positions.
Customs Tariff Law is composed of 97
headings and 10.229 tariff items. The number
of tariff items comparing to past 8.554 tariff
items is bigger now by 1.675 or 19,58%. Tariff
items were significantly increased in the agriculture
sector i.e. by 1.315 or 121,08%. Tariff
rates are given in % as compared to ad valorem,
ranging from 0% to 30%.
The Law also includes past levies, which
were charged on certain agricultural products
and food staff, according to the last Decree on
Special Import Duties on Agricultural Products
and Food Stuffs ("Official Gazette
RoM", No. 61/03). The levies are denominated
in their total amount as per unit of measurement
and shown together with the rate
level in the Customs tariff (column: "tariff rate").
Average nominal tariff protection rate is
6,17%, while according to the last Decree,
such rate was 6,13%, which means that the
average nominal tariff protection rate was
increased by 1,1%. Rise in average nominal tariff
protection rate is a result of increase of tariff
rate for: beef meat (fresh and chilled), other
meat-packaging products (pig, sheep, goat
and horse meat), sea fish (pilchards, mackerels,
eels etc.), pickles and cucumbers, cacao
butter, fat and oil and diesel fuel with increased
sulfur concentration.
Rise in tariff rates for beef meat from 0%
or 5% to 10% or 15% is a result of commitment
to protect domestic production and annulment
of the Ordinance on Taking Actions
for Preventing BSE from entering the territory
of the Republic of Montenegro ("Official
Gazette RoM", No. 23/05), prohibiting import
of beef meat, so there was no need for establishing
a higher tariff protection rate for
this product earlier.
Increase of tariff rate for certain meatpackaging
products, sea fish, pickles, cucumbers,
cocoa butter, fat and oil was caused by a
need to protect domestic production of the
said products.
Rise in nominal tariff rate for diesel fuel
with increased sulfur concentration is a result
of commitment to reduce negative impacts
on the environment.
Average nominal tariff protection rate
was reduced in the following headings:
5(3,52%); 6(3,24%); 9(0,95%); 11(0,66%);
Mitar Bajčeta
12(7,53%); 13(2,85%); 14(1,55%); 15(1,63%);
23(0,03%); 24(0,75%); 27(0,05%); 28(1,20%);
29(0,17%); 31(1,59%); 33(4,69%); 38(0,48%),
39(1,23%), 44(0,12%), 46(5,00%), 48(0,38%),
49(0,62%), 50(3,00%); 51(1,29%); 52(6,57%);
53(4,00%); 54(5,77%); 55(6,88%); 56(2,54%);
57(6,85%); 58(9,04%); 59(1,61%); 60(4,91%);
61(9,64%); 62(11,08%); 63(7,71%);
64(0,86%); 65(0,53%); 67(3,12%); 68(0,33%);
70(0,43%); 71(5,12%); 72(0,18%); 74(4,31%);
76(0,35%); 82(0,30%); 83(0,44%); 84(0,17%);
89(0,07%); 90(0,08%); 91(1,73%); 94(0,11%);
95(0,12%) i 96(0,06%), which is a result of
the tariff rate reduction for the largest number
of products under the above headings.
The Customs Tariff Law provides for no
obligation for payment of export duties,
which were charged on certain products (raw
skin, iron scraps etc.) according to previous
regulations. Payment of export duties was stipulated
under the Law on Action Plan for
Harmonization of Economic Systems between
the Member States of the State Union
Serbia and Montenegro for Prevention and
Removal of Obstacles to Free Movement of
Goods, Services and Capital ("Official Gazette
RoM", No. 42/03). However, upon amendments
to the said Law and adoption of the
"double-track" approach, existence of export
duties was no longer needed, and Montenegro
was given opportunity to arrange its customs
system and tariff policy in accordance
with its needs and level of economic development.
ASSISTANT MINISTER
Koviljka Mihailović,
Mitar Bajčeta
Phone: 081-225-013
E-mail: mf@mn.yu
" The Law is published in the "Official Gazette of the RoM", No. 75/05
23

Outline of the Customs Tariff Law
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
1. Comparative Review of the Tariff Rates according to the Law and the last Decree
2. - Average Tariff Protection Rates, according to the Law and the last Decree, as per sections (21 Section);
24

Which amendments are made to the Law on Excises
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Which amendments are made to the Law
on Excises
1. BASIC DECISIONS
Basic decisions of the Law on Excises ("Official
Gazette of the Republic of Montenegro",
No. 65/01), were passed in the framework of
"package" of the new tax regulations by the
end of 2001, which application started on april
1, 2002. This Law is based on decisions of the
EU member states, regulated by several Directives
(92/12/EEC, 92/78/EEC, 92/80/EEC,
92/81/EEC, 98/83/EEC, 92/84/EEC,
92/108/EEC, 92/94/EEC etc.), which defined
common statements on excise duties, in particular
in the part related to: area of application,
taxation subject, excise debtors, structure and
minimum excise duties rate level, as well as types
of exemptions from excise duties payment.
Excise duty payment obligation was introduced
by the Law for three groups of products:
alcohol and alcoholic drinks, tobacco products,
mineral oils and their derivatives and substitutes.
Excise duty obligation is paid per unit of
measure, except from cigarettes wherein the
combined manner is used to determine the excise
duty obligation level (specific and ad valorem).
The greatest part of excise duties level is
adjusted to the minimum amount in the Europen
Union, and transitional period until January
1, 2005 was determined for the products for
which the adjustment was not possible (beer
and domestic brandy).
Excise duty obligation level for cigarettes
until January 1, 2006 was defined by the Decree
on Determining the Amount of Specific
and Proportional Excise Duty on Cigarettes
("Official Gazette of the Republic of Montenegro",
No.15/02 and 34/04), and according to
that Decree, excise duty obligation consisted
of specific and proportional excises (what is in
accordance with the EU standards), but its total
level was not adjusted to the lowest amount
of excise, which is envisaged by the EU Directives.
Namely, Directives 92/79/EEC,
92/80/EEC, 95/59/EC and 2002/10/EC envisaged
that the lowest excise amount for cigarettes
amounts to 57% of the retail price of the
most popular cigarette in country, and from
2006 the amount can not be lower than 64,00
eur per kilogram. According to the mentioned
Decree, excise duty level for cigarettes was determined
depending on the quality group of
cigarettes, and amounted to: for quality group
"A" , 8 eur for 1.000 pieces and 50% of import
i.e. selling price, for quality group "B", 4 eur
for 1.000 pieces and 25% of selling price, and
for quality group "C", 2 eur for 1.000 pieces
Ružica Glomazić
and 20% of selling price.
2. WHICH ARE THE MOST SIGNIFICANT
AMENDMENTS
The Parliament of the Republic of Montenegro
adopted the Law on Amendments of the
Law on Excises ("Official Gazette of the Republic
of Montenegro", No. 76/01) at the third
session of the second regular session in 2005,
held on December 6, 2005, and its application
started from January 1, 2006.
The most significant amendments, which
were provided by the provisions of the mentioned
law, are related to: time of beginning of
the excise duty calculation and payment obligation
for cigarettes, as well as the manner of
marking the alcoholic drinks and tobacco products
with the excise stamps.
It is envisaged by the Law to calculate the
excise duty for cigarettes at the moment of taking
over the control excise stamps, and this
decision is essentially different from the past
decision according to which the excise was calculated
at the moment of putting the tobacco
products into free circulation i.e. in the course
of these products`sale to end users (for domestic
cigarettes and cigarettes which are sent
to excise warehouses).
Excise calculated for cigarettes is paid within
the deadline of 60 days from the date of
control excise stamps assumption, wherein the
excise payer is obliged to present to the relevant
tax authority the bank guarantee to the
amount which corresponds to the calculated
excise. Pursuant to the past decision, excise was
due to be paid until the end of the next month
Koviljka Mihailović
for the previous month for domestic cigarettes,
and as regards import it was done simultaneously
with the customs duty payment, if the
transport to excise warehouse was not approved
(in which case the deadline for the excise
payment was the same as for domestic cigarettes).
According to the amended decisions, excise
obligation for cigarettes consists of specific
excise, which amounts to 1,00 eur per kg i.e.
0,02 eur/pack for all cigarettes (domestic and
imported), and proportional excise which
amounts to 26% of its retail price (wherein excise
and Value Added Tax are included).
Excise for all other tobacco products is maintained
at the existing level and it amounts to:
for cigars and cigarillos - 10,00 Eur, for fine cut
tobacco (rolling cigarettes) for fine cut tobacco
(rolling cigarettes) - 20,00 Eur, and for other
smoking tobacco - 15,00 Eur.
Retail prices of cigarettes are determined
by the producer i.e. importer and the same are
obliged to report the prices to the relevant tax
authority and publish them in the "Official
Gazette of the Republic of Montenegro" before
putting them into circulation. Selling cigarettes
at retail prices which are higher than reported
is not allowed.
Significant amendments to the past decisions
are related to marking tobacco products
and alcoholic drinks with control excise
stamps. In contrast to the past decisions, there
is now regulated the obligation to use excise
stamps for products, which are being sold in
the customs free shops and which are driven
through our customs area, and for which the
25

Which amendments are made to the law on excises
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
foreign supplier did not submit his excise
stamps.
Pursuant to the authorisations from the
Law on Excises (Article 11), the Government of
the Republic of Montenegro adopted the Decree
on Marking Tobacco Products and Alcoholic
Drinks with Control Excise Stamps, at the
session on December 29, 2005 ("Official Gazette
of the Republic of Montenegro", No.
82/05), which regulates in detail the subject
matter related to the manner of marking the
tobacco products and alcoholic drinks with the
stamps, manner and procedure of approval,
printing and issuance of the excise stamps, and
manner of keeping records about destroyed, issued,
used, damaged and unused excise stamps
for tobacco products and alcoholic drinks.
The novelty is also that the Law provided
the Government with the authorisation to
increase the excise amount determined by the
Law up to 20% at annual level, in order to gradually
adjust the excise obligation level for cigarettes
to the lowest amount in the European
Union. Increase in percentage would be determined
depending on the amount of the excise
paid for cigarettes from the best selling price
group in our Republic (the most popular cigarettes).
On the proposal of tax authority, the
Ministry of Finance would determine the
amount of retail price of cigarettes from the
best selling price group, at least once annually,
and that price would be published in the "Official
Gazette of the Republic of Montenegro".
This decision creates prerequisites for more efficient
adjustment of our excise level for cigarettes
to the standards in the EU.
3. COMPARATIVE DECISIONS IN
CONNECTION TO PAYMENT OF EXCISE
FOR CIGARETTES
Excise duty level for cigarettes in the neighbouring
countries is pretty uneven and only
the Republic of Slovenia applied the criteria
for determiantion of excise level, which are envisaged
by the European Union standards. Namely,
excise for cigarettes in that republic was
determined on the basis of retail price of cigarettes
from the best selling price group, which
on July 1, 2005 amounted to 1,712 eur/pack.
According to the Government`s regulation,
specific excise to the amount of 12,7 eur for
1000 pieces of cigarettes is paid and proportional
excise at the rate of 42,56% of the retail price
of cigarettes. Thus, for example, for the
brand cigarettes "Gaulois" which retail price is
1,90 eur (450 SIT), total excise amounts to
1,08eur.
In the Republic of Croatia, cigarettes are
placed in three quality groups because of the
need to calculate excises, and the excises amount
respectively:
- for the group "A" - 0,71 eur/pack
- for the group "B" - 0,82 eur/pack
- for the group "C" - 1,41 eur/pack
In the Republic of Serbia, excise for cigarettes
is paid as follows:
- in the period from January 1, 2005 to
December 31, 2006 for imported cigarettes-
0,12 eur/pack, and for cigarettes produced in
the country -0,012 eur/pack and 30% of retail
price;(e.g. for imported cigarette "Davidoff",
which retail price amounts to 1.1eur/pack, total
excise amounts to 0,47eur/pack).
- from January 1, 2007 to December 31,
2009 for imported cigarettes -0,12 eur/pack
and for cigarettes produced in the country -
0,02 eur/pack and 40% of retail price, and
- from January 1, 2010 for imported cigarettes-0,12
eur/pack and for cigarettes produced
in the country -0,06 eur/pack, and 50%of
retail price.
If the excise calculated for tobacco products
is lower than the minimum excise amount
envisaged by the Law on Excises (for cigarettes
it amounts to 70% of the total excise determined
for the category of cigarettes with the
most popular price), the minimum excise is
paid (10 eur/pack). The most popular cigarette
price amounts to 0,43 eur/pack;
In Kosovo - excise is paid to the amount of
0,20 eur/pack for all cigarettes (imported and
domestic).
In Bosnia and Herzegovina the proportional
rate of 49% of the retail price of cigarettes
is applied to all the cigarettes;
In the Republic of Makedonia - excise for
cigarettes, for the period from January 1, to
December 31, 2006 amounts to 0,028 eur/pack
and 34%of retail price, whereas for cigarettes
to be imported, excise for the same period
amounts to 0,016 eur/pack and 19% of retail
price. Thus, e.g. for domestic cigarette "Rodeo
light" which retail price amounts to 0,50 eur,
total excise amounts to 0,26eur. From January
1, 2007, excise level will amount to 0,04
eur/pack and 35% of retail price both for domestic
and imported cigarettes;
In the Republic of Albania excise for cigarettes
is paid to the amount of 0,17 eur/pack,
for all kinds of cigarettes (imported and domestic).
4. EXCISE PAYMENT IN TOBACCO
PRODUCTS TRADE WITH THE REPUBLIC
OF SERBIA
From January 1, 2006 the manner of excise
calculation and payment is changed in tobacco
products trade with the Republic of Serbia.
Namely, the Government of the Republic
of Montenegro, adopted the Decree on Change
of the Excise Calculation and Payment Manner
in Tobacco Products Trade with the Republic
of Serbia, at the session on December 29,
2005, ("Official Gazette of the Republic of
Montenegro", No. 82/05). According to the
mentioned Decree, excise is not calculated nor
paid in our Republic for tobacco products sold
to the buyers from the territory of the Republic
of Serbia, and excise is calculated and paid
for the tobacco products procured from the
territory of Serbia as if these were imported
products.
ASSISTANT MINISTER
Koviljka Mihailović
Ružica Glomazić
Phone: 081-242-046, 224-480
E-mail: mf@mn.yu
26

Miodrag Radusinović
Realization of the Customs Administration activities
CUSTOMS SYSTEM ROLE IN THE FRA-
MEWORK OF IMPLEMENTATION OF
THE TOTAL ECONOMIC REFORMS OF
MONTENEGRO
Competences and tasks of the Customs
Administration and customs officers are regulated
by the Law on Customs, Law on Customs
Office, Law on Public Administration
as well as special regulations connected to
the Customs Office work. Customs Administration
carries out its activity through its
own organizational units (in the framework
of its competences), throughout the entire
area of the Republic of Montenegro.
Customs system proved to be very efficient
and sustainable in the framework of the
Republic`s economic system, as well as one
of reliable backings of sovereign Montenegro.
Accountability of Customs Office of the
Republic of Montenegro as regards program
tasks efficient implementation, which are
defined by the regulations and program of
the Government of the Republic of Montnegro,
point to the fact that it is certainly one
of the system`s vital parts.
Law on Customs, which entered into force
on February 20, 2002, and is being applied
from April 1, 2003, determined the customs
area of Montenegro and competence
of the Customs Office in that area. Thus, the
independent customs system i.e. Customs
Office of the Republic of Montenegro begun
functioning. This is also ceritied by the Council
of European Commission regulation
(No.1946/2005 from November 14, 2005),
which defines the following three new origins
of goods in Serbia and Montenegro:
"Serbian origin", "Montenegrin origin" and
"Kosovo origin". This is related to the application
of the authonomous trade measures
envisaged by the regulation of the Council of
European Commission. (No. 2007/2000
from September 18, 2000), and the Customs
Office of Montenegro is in charge of the implementation
of these measures. Therefore,
adoption of the Law on Customs Tariff and
other regulations simply upgrade the existing
customs system of Montenegro.
Customs Office continued with modernization
in 2005, through its risk management
system development, in cooperation
with the World Bank and by means of making
an integrated border management strategy,
along with the other state authorities
which are in charge of the state borders control.
The Administration is beneficiary of the
World Bank credit for Customs Office modernization
in the framework of the TTFSE
project (project of trade and transport facilitation
in the Southeast Europe countries).
Objectives of this project are, inter alia, customs
office reform, transport acceleration,
non-customs costs reduction, suppression of
smuggling, prevention of corruption. These
objectives realization is carried out through
Customs Office reform, modernization and
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Realization of the Customs
Administration activities
strenghtening of the international cooperation,
professional training, modern equipment
etc.
Customs Office has a significant and indispensable
role in coordination of activities
at the border crossings. Therefore, in that
sense its role in the field of combating organized
crime, corruption and international
terrorism is stressed with special reference
to:
- Customs Offices capacities development,
in the sense of officers training, introduction
of new operation standards, modernization,
with the goal to enable the customs
office to respond to challenges of modern
operating in the 21 century;
- Necessity of making a positive impact
of the customs office work in publicity;
- material position of the customs officers;
- Role of the Customs Office in th new
environment (borders management, security
issues, relations with other border authorities);
- Fight against corruption through organization
and procedures (selectivity and risk
management);
- Progress made in relation to the Customs
Offices modernization.
REALIZATION OF TASKS IN 2005
This Administration is in charge of the
total collected amount 258.143.052,24 eur
of own-source receipts in the period from January
1 to December 28, 2005, what is 63%
of own-source receipts realized by the Budget,
which amount to 411.004.020,47eur. The
collection was higher by 29% in comparison
to the same period last year. According to the
receipts structure the collection is as follows:
- Customs duties - 39.132.204,10 eur
was collected, what is higher by 5,69% in
comparison to the plan, and higher by
18,16% in comparison to the last year
- imported goods excise - is calculated to
the amount of 66.383.183,09 eur, what is
higher in comparison to the same period last
year by 2,07%, and 53.218.810,85 eur was
collected, what is 114,95% of the Budget
plan, and higher by 11,32% in comparison to
the same period last year.
- VAT - out of the total VAT realization,
which is 189.731.968,50 eur, the Customs
Administration collected 161.699.768,96
eur or 86%, what is significantly higher than
planned by the Budget and higher by 20,14%
in comparison to the same period last year.
In the internal turnover 14% (28.032.199,54
27

Realization of the Customs Administration activities
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
eur) was collected, plus the amount of return
done by the Tax Administration.
- Other receipts (taxes) - 4.092.268,33
eur was collected.
Significant results were made also in the
plan of customs area protection, in which
process 2.553 offense procedures were instituted,
or 180% more in comparison to the
last year. The most frequent offense cases were:
cigarettes, fuel, clothes and footwear,
food, passenger motor vehicles. The most frequent
forms of customs frauds are:
- failing to report goods to the customs
authority,
- false marking of the type of goods,
- false presentation of the goods value
(false invoices)
By legally valid decisions 29.815 boxes of
cigarettes were withdrawn, which value was
about 99.884,00 eur, and 33.644 liters of
fuel.
Control and organizational measures have
been undertaken in order to strenghten
professionalism, customs officers integrity
building and fight against corruption. Totally
86 iniciatives were submitted for instituting
disciplinary procedures, in which process
the newly formed control units role is
significant. One decision was made to give a
notice, 25 more strict and 14 less strict disciplinary
measures, what is by 60% more than
in the same period last year.
Modernization of the Customs Office
has been continued this year, through risk
management develompent, in cooperation
with the World Bank and through making
the integrated border management strategy
together with other state authorities in charge
of the state borders control. Open Line
operated in the course of the year, and its
further popularization is planned in the next
period.
Customs Administration attaches great
importance to the international, and in particular
regional cooperation. Montenegrin
Administration representatives took part in
significant international events, and they
were organizers of the two international regional
events: Regional Conference on Rrisk
Management and IX TTFSE of the Regional
Monitoring Committee. Agreements with
the Customs Offices of Iran, Croatia and Albania
were signed during 2005.
Facilitation of trade, acceleration of
transport and security of deliveries are permanent
tasks which require special methods
in the Customs Office work. Training and acquisition
of new knowledge were preoccupation
of a great number of customs officers,
who attended numerous seminars and
workshops during 2005, which were organized
together with domestic and international
organizations and institutions (CLDP;
TAIEX; CAFAO; USAID; WCO (SCO); TAXUD;
EXBS; STAT; SECI; TTFSE; Ministry for Foreign
Economic Relations and European Integration;
Council of Europe and European Agency
for Reconstruction; World Bank etc.).
Significant experts assistance was provided
by the European Union through the CA-
FAO mission, the Government of the USA
and the Government of Great Britain. The
Customs Administration makes significant
contribution to the activities implemented
by the Government of Montenegro aimed at
further customs system improvement, along
with simultaneous functional and organizational
transformation. Construction of border
crossing Debeli Brijeg and procurement
with a determined quantity of hand equipment
provided for better working conditions.
However, the Adminstration management
will be faced with the lack of funds for
housing construction and relevant modern
equipment, which is going to be future challenge.
In the course of this year 42 officers
were employed and 25 left the office.
Extensive and complex tasks for 2006 are
also a challenge. Budget receipts collection
obligations increased in comparison to 2005,
whereas customs area protection is a permanent
task. By the Budget plan for 2006 it is
envisaged to collect:
- customs duties - to the amount of
39.718.056,18 eur, what is an increase by
5,79%
- imported goods excises - to the amount
of 77.544.673,69 eur, what is an increase by
26,58%
- VAT- to the amount of 215.116.796,26
eur, what is an increase by 13,88%
DIRECTOR OF THE
CUSTOMS ADMINISTRATION
Miodrag Radusinović
Phone. 081-623-322
28

Prevention of Money Laundering
Predrag Mitrović, M.A.
Montenegrin Administration for the
Prevention of Money Laundering,
an institution which is globally
known as a Financial Intelligence Unit was
established by a Decree of the Montenegrin
Government of December 2003, and tasked
with implementation of the Anti-Money
Laundering Law, which entered into force on
October 8, 2003. In July 2004, reporting by
persons under obligation started. Government
of the Republic of Montenegro provided
budget funds for starting of operations,
while appropriate information and telecommunication
equipment was provided by donors
(primarily USAID and US Department
of the Treasury). Basic by-laws were also
drafted and the Administration was furnished
with adequate organizational structure.
All relevant international standards, particularly
all 49 FATF (Financial Action Task Force)
recommendations as well as the EU Directives
I and II were incorporated in the Montenegrin
Anti-Money Laundering Law, through
its implementation system. Amendments
and modifications to the Law made in
March 2005 demonstrated efficiency in
accepting new standards and requirements.
Provisions concerning prevention of financing
of terrorism were added, whereupon it
became Anti-Money Laundering and Combating
the Financing of Terrorism Law. On
that occasion, a new person under obligation
was entered into the Law: NGOs, nonprofitable
and humanitarian organizations,
while reporting obligation was adjusted to
the international standards, i.e. only reports
on: cash transactions exceeding 15.000 EUR;
tie-in cash transactions exceeding the said
amount as well as suspicious transactions irrespective
of their amount or type shall be
submitted.
In order to improve co-operation with
other state authorities, the Administration
signed agreements with the Ministry of the
Interior, Customs Administration, Tax Administration,
while agreement with the Securities
Commission is in the pipeline.
As regards international co-operation,
the Administration signed agreements with
financial intelligence units from all neighbouring
countries. As a confirmation of
full acceptance and enforcement of all international
standards in this field, which was
verified through several evaluations, the
Montenegrin Administration was admitted
into the Egmont Group, world association of
FIUs, on July 1, 2005 in Washington. The Administration
met strict conditions for the
membership within a short period of timeonly
a year after its becoming operational.
Exchange of data with foreign financial intelligence
units has thus been much simplified
through the protected web site of the Egmont
Group.
The Administration representatives participate
on equal footing in the work of the
Egmont Group Task Forces. They also participate
in the work of the MONEYVAL (CoE
Committee on Anti-Money Laundering) almost
from the very beginning of the Administration
activities.
In 2005, the Administration provided
data on more than 100.000 transactions, and
following the primary processing of data,
which implies requesting additional information
from a person under obligation, 1147
files were opened.
Following additional analysis, 347 files
were forwarded to a next phase of analysis.
Out of the 347 files, 158 were opened upon
the initiative of the persons under obligation,
while 189 files are result of primary
analytic data processing.
Following analytic procedure within the
Unit for Suspicious Transactions, 200 files
were opened. Upon completion of the data
processing phase, which includes gathering
of information about a person or transaction
under the opened file from all persons under
obligation, other state authorities, foreign financial
intelligence units and other possible
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Activities of the
Administration for the
Prevention of
Money Laundering
sources, 13 files were sent to the Public Prosecutor's
Office in accordance with Article
26 of the Anti-Money Laundering Law. Thus,
the Administration completed legal procedure
for each file.
In addition to processing the files according
to described procedure, Anti-Money
Laundering Law, Article 24, allows other
competent state authorities to launch an initiative,
thus obliging the Administration to
institute procedure regarding analysis and
processing of the transactions and persons
that are subject-matter of the initiative. On
that account, in 2005 the Administration acted
upon 9 files at the initiative of the Public
Prosecutor, 18 files at the initiative of the Ministry
of the Interior and 6 files at the initiative
of other authorities. Therefore, a system
for anti-money laundering and combating
financing of terrorism provided for under
the Law was fully implemented, which involves
several competent authorities.
As regards the international co-operation
in 2005, 52 requests were sent to foreign
financial intelligence units for providing information,
and 44 requests were received asking
for information about certain legal and
natural persons.
Relevant international institutions and
individuals continually give positive marks
for the work of the Administration, and in
the course of this year, further mechanisms
for prevention of money laundering and terrorism
financing will be put in place.
Implementation of the EU Directive III
(which was adopted end last year) is ahead of
us. This implies new amendments to the Law,
whereby new directives and recommendations
will be adopted, while the operational
level of the Administration will be increased.
Implementation of innovations from the international
practice in our work is going to
be a permanent task in this year as well. Therefore,
a special priority will be given to the
international co-operation, together with cooperation
and coordination with other competent
state authorities of Montenegro.
DIRECTOR, ADMINISTRATION FOR THE
PREVENTION OF MONEY LAUNDERING
Predrag Mitrović, M.A.
Phone: 081- 210-025
29

Anticorruption activities in Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
National, regional and
international
anticorruption activities
in Montenegro
"ALTHOUGH ITS IMPACTS ARE PERHAPS MORE VISIBLE TODAY IN A GLOBALIZING
WORLD, CORRUPTION IS NOT A NEW PROBLEM. WE DO NOT EXPECT TO SOLVE IT TO-
MORROW. I DO, HOWEVER, EXPECT THE INTERNATIONAL COMMUNITY TO RAISE TO
THE CHALLENGE OF DEALING MORE EFFECTIVELY WITH THIS GLOBAL CHALLENGE,
AND IN THIS I AM VERY MUCH AN OPTIMIST. "
(ANTONIO MARIA COSTA, UNITED NATIONS UNDER-SECRETARY GENERAL)
Veselin Šuković, M.A.
Recognizing the significance of comprehensive
and efficient fight against corruption,
and the necessity of the combating
against that criminal phenomenonwhose
harmful consequences jeopardize legal,
economic and institutional system of
one country, Montenegro has, as a full member
along with other countries of the Region,
in February 2000 signed an Agreement and
Action Plan of the Stability Pact Anti-Corruption
Initiative for the South-East Europe
(SPAI), and thus unmistakably shown its political
will and determination for taking anticorruption
activities, on the national and
regional level.
In the past period, Montenegro has made
significant progress in the realization of
total, and therefore the anti-corruption reforms,
especially through the adoption of the
national strategy, i.e. Fight Against Corruption
and Organized Crime Program, implementation
of international instruments and
standards, creation of the reliable public administration,
strengthening of the national
legislation and rule of law, promotion of integrity
and transparency in the economic
business and cooperation with the Non-governmental
sector. All these things were on
several occasions positively rated by the Stability
Pact and other relevant regional and
international organizations and institutions.
At the beginning of 2001, The Government
of Montenegro was one of the first to
form a special body- Agency for Anticorruption
Initiative, which besides the innovating
of applicable legislation performs preventive
and advertising actions, and establishes cooperation
with the regional and international
organizations, which provide continuing
support for implementation of programs
and projects, and especially in the realization
of the assumed international obligations
from that field.
Montenegro, through the membership
of the State Union in the Council of Europe
actively participates in work of the Group of
States Against Corruption (GRECO). On the
occasion of the visit of the GRECO expert team
in the 2005, for the purpose of the drafting
of the report, applicable legal and anticorruption
legislation was analyzed, and also
the existing institutional capacities and mechanisms,
and the level of the public awareness
of the activities which are performed in
that field. Bearing in mind the great impor-
30

Anticorruption activities in Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
tance of the recent opening of negotiations
for signing of the Stabilization and Association
Agreement, and the aspiration of the
Republic of Montenegro to, as soon as possible,
through the actual process of the European
integration, become the respectable
member of the European family, and the fact
that the membership in the Council of Europe
is in many ways considered to be the entrance-hall
of the European Union the report
of GRECO is indubitable because, beside the
review of the condition in this area it will also
contain the obligatory recommendations
for our authorities and institutions.
Within the global orientation of the Stability
Pact for the transfer of control over its
initiatives to the countries of the Region, Regional
Anticorruption Secretariat was formed,
in Sarajevo, in the October 2003, which
represents the concrete indicator of the commitment
of the countries of the Region to
continue and intensify cooperation in the
process of the more efficient fight against
the corruption in the South-East Europe.
Montenegro, through the candidacy of the
Executive Secretary, for over a year has an active
role in the control and coordination of
this Regional Secretariat.
In the context of the anticorruption activities
at the international level, it is necessary
to point to the significance of the first global
anticorruption instrument- United Nations
Convention Against Corruption, ratified
by the Assembly of the State Union of
Serbia and Montenegro in the October 2005.
At the beginning of the December 2005,
it was two years from the signing of the United
Nations Convention Against Corruption,
better known as Merida Convention - it got
the name by the Mexico City, where the International
Conference was held, and where
high representatives of 111 countries all over
the world, including the representatives of
the State Union Serbia and Montenegro have
signed this first global anticorruption instrument
on the 9. and 10. December 2003.
The Assembly of the State Union Serbia
and Montenegro, on its 40th session adopted
the Law on Ratification of the United Nations
Convention Against Corruption on 22.
October 2005. After more than thirty ratifications
of the signatory countries, and in
terms with the paragraph 1, article 68 of the
Convention, this international document entered
into force on the14. December 2005.
Convention is, when compared to other
international-legal instruments relative to
this criminal phenomenon, unique not only
for its global approach to this problem, but
also for very detailed and comprehensive
provisions. That international document
obliges the countries contract parties to conduct
a wide range of anticorruption measures
- establishment of special anticorruption
bodies, strengthening of transparency of financing
of political parties and election campaigns,
adoption of ethic codes for public
servants and officials, comprehensive definition
of procedures for public procurement,
introduction of responsibilities of legal persons
for criminal acts connected to corruption,
establishment of efficient witness protection,
confiscation of property gained by
corruptive actions, avoiding conflict of interest,
prevention of money-laundering, application
of the principle of free access to information,
including the private sector and civil
society in the fight against corruption.
Having in mind the fact that all the member
counties, i.e. Serbia and Montenegro, after
the recent ratification of the Convention
have exclusive jurisdiction for the implementation
of that international document, Montenegro
has much earlier taken steps in that
direction- through the establishment of specialized
bodies in the field of anticorruption,
of public procurement, of prevention of money-laundering
and conflict of interest, through
the comprehensive reform of legislation
and implementation of new legal solutions
and relevant international standards, and
through the introduction and application of
special investigation actions (witness protection,
measures of secret surveillance).
In the forthcoming period, all authorities
will intensify activities for the purpose of
more thorough harmonization of the domestic
legislation with the binding provisions
of the Convention, and in particular,
implementation of the national Fight
Against Corruption and Organized Crime
Program. By establishment of the Inter-sector
body for monitoring and by drafting of
Action Plan, as an integral part of the Program,
optimal conditions are created for the
realization of this, for Montenegro strategically
significant document.
For the purpose of efficient implementation
of the United Nations Convention and
Fight Against Corruption and Organized Crime
Program, it is necessary to proceed with
the further development of legal system,
education and training of the representatives
of authorities and institutions, which will, as
in all previous activities be accomplished
with the cooperation and with the support
of the Council of Europe, OSCE, OECD,
USAID, UNDP, United Nations Office on
Drugs and Crime (UNODC) and other international
organizations and institutions specialized
in fight against corruption.
DIRECTOR OF ANTICORRUPTION
INITIATIVE ADMINISTARTION
Veselin Šuković, M.A.
Phone: 081-234-316
31

Restitution
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
- Restitution -
"FIRST PAYMENTS TO FORMER HOLDERS WERE PAID IN ACCORDANCE WITH THE
LAW ON RESTITUTION OF EXPROPRIATED PROPERTY RIGHTS AND COMPENSATION"
Đorđjina Lakić
Management board of the Compensation
Fund adopted the Financial
Plan for the period 1.10- 31.12.
2005, in the November 2005, and by that
conditions were officially created for the
Compensation Fund to start with the payments
of the annuities for the compensation
of former holders for the property rights expropriated
in favour of national wide, national,
public or common property.
The Law on Restitution of Expropriated
Property Rights and Compensation defines
sources of revenue of the Compensation
Fund. When their height was being set many
facts were taken into consideration: completed
privatisation of state property up to this
moment, sold shares of state funds, planned
budgetary assets for that purpose, revenues
realised on the base of collection of the revalorised
amounts paid by former holders, estimated
value of bonds and other sources stipulated
by the Law. Funds for the payment
are earmarked according to decisions of the
municipal commissions that have been applicable
and executive up to the present. Financial
plan determines dynamics and the amount
of the annuity in accordance with the
provisions of the Article 22 of the Law, according
to which the former holder acquires the
right to the compensation in cash, paid out
from the Compensation Fund, proportionally
to the amount of claims in comparison to
the total claim from the Fund, 30 days after
the deadline for submission of the claim, and
after that every six months depending on the
availability of assets in the Fund until their final
payment. The funds were earmarked for
the payment by municipalities.
Namely, the Law on Restitution of Expropriated
Rights and Compensation, passed
in April 2004, stipulated the right of former
holders to restitution for expropriated ownership
rights and other property rights and
the compensation for rights expropriated in
favour of national wide, national, public or
common property.
In accordance with legal solutions, municipal
commissions were formed for restitution
and compensation, which in the first instance
procedure decide upon claim for restitution
or compensation, so that 20 commissions
or commissions in all municipalities
except in Žabljak are in charge of the procedure
upon claims of former holders.
Based on the Law the Government passed
the Decision on establishment of the Compensation
Fund as a legal person and which,
within the scope of its activities, provides
funds for the compensation for former holders
and for the rights expropriated in favor
of national wide, national, public or common
property, and provides legal, economical and
rational spending of assets earmarked for the
compensation to former holders.
A year and a half after the passing of the
Law the first payments start, which is significantly
shorter period when compared to
the countries in the region which started the
process of restitution years ago (Slovenia
1992, Macedonia 1998 etc.).
In the November 2005, Compensation
Fund paid first six-month part payment to
former holders, and on the base of four legally
valid decisions of municipal commissions
of Podgorica, Budva, Pljevlja and Cetinje. The
total amount of the first six-month part payment
paid to former holders is 20.861,46 eur.
For most of commissions, the deadline
for submission of claims is not yet over, so
that there is no possibility for more precise
evaluation of property whose restitution is
claimed, and especially not for the amount
of the restitution or compensation liability,
which will depend on the grounds of submitted
claims.
DIRECTOR OF THE COMPENSATION FUND
Đorđina Lakić
Phone: 081-208-005
32

Restitution - second
- instance procedure
Law on Restitution of Expropriated Property
Rights and Compensation of Former
Holders ("Official Gazette RoM", No.
21/04), which entered into force on 8 April
2004, governs conditions, manner and procedure
of expropriation of right of ownership and
other property rights and compensations of
former holders vis-a-vis rights expropriated in
favour of national, state, social and cooperative
property. Therefore, the country created necessary
conditions for removal of the consequences,
which resulted from adoption and implementation
of the so-called revolutionary laws
in the period after the end of the World War II.
According to the Law, first-instance administrative
procedure which decides on an applicant
i.e. former holder's request for restitution
or compensation is conducted by municipal
commissions in charge of restitution
and compensation established by local parliaments.
Up to now such commissions have
been established in 20 municipalities (except
for the municipality of Zabljak).
Parallel with passing necessary by-laws
provided for under the Law, the Ministry of
Finance of the Government of Montenegro,
as required under the Law, established a second-instance
authority responsible for acting
upon appeals against the decisions made
by the first-instance local commissions.
Up to now, concluding with 26 December
2005, the Ministry of Finance, as a second-instance
authority, processed 79 appeals total, as
per the following municipalities: Podgorica 19,
Ulcinj 14, Pljevlja 13, Budva 8, Tivat and Herceg
Novi 7 each, Danilovgrad 5 and Bar and Cetinje
3 each. Out of the above 79 appeals, decision
was made on 70 of them, 52 of which were approved
so the first-instance decision was annulled
and in most cases, the first-instance authority
was asked to renew the procedure.
Implementation of the Law on Restitution
of Expropriated Property Rights and
Compensation of Former Holders definitely
requests a further education, strong engagement
and certain level of specialist training,
which will indeed be partly achieved after a
certain period of time and larger number of
the processed files and decisions made.
Given the current trends and launched reforms
in almost all fields of the social life,
including the public administration system together
with local government and significant
efforts aimed at the staff training, it is necessary
to establish an adequate model of a permanent
communication between the Ministry of
Finance and local commissions, primarily with
respect to the Law on Restitution of Expropriated
Property Rights and Compensation of Former
Holders, being a key material regulation
and with regard to the General Administrative
Procedure Act, which is a main procedural law.
The Ministry of Finance will continue with
the already established, positively marked and
purpose-serving practice to provide explanations
and instructions to the former holders as
well as interpretations of certain provisions
under both above laws, including other laws
and regulations applicable in the work of the
first-instance local commissions. We also invite
both local commissions and former holders
to send their opinions, proposals and suggestions
to the Ministry concerning all issues under
the competence of the local commissions
and the second-instance authority so that the
Ministry of Finance could provide adequate information
to all interested persons with the
aim to fulfill main purpose of the Law on Restitution
of Expropriated Rights and Compensation
of Former Holders that is a timely, efficient
and legal exercising of rights of the applicants
i.e. former holders.
INDEPENDENT ADVISOR I
Zoran Radulović
Phone: 081-224-870
e-mail: mf@mn.yu
Zoran Radulovic
Restitution - second instance
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
33

Co-operation with international financial institutions - IMF
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Co-operation with international
financial institutions
- International Monetary Fund (IMF)
INTRODUCTION
Upon establishing of the State Union Serbia
and Montenegro (by adoption of the
Constitutional Charter on February 4, 2003),
the new state became a legal successor of the
FRY and internationally recognized entity.
Governments of the Republic of Montenegro
and Republic of Serbia concluded in April
2003 an Agreement on Representation of the
State Union Serbia and Montenegro to the
International Financial Institutions. According
to the Agreement, the Central Bank of
Montenegro is a fiscal agent of the State
Union of Serbia and Montenegro to the
World Bank, while National Bank of Serbia is
assigned the same task to the International
Monetary Fund. Governor of the central monetary
institution of the Republic of Serbia is
nominated for the governor of Serbia and
Montenegro in the IMF, while Minister of Finance
of the Republic of Montenegro is nominated
for the governor of Serbia and Montenegro
in the World Bank. Serbian Minister
of Finance and Economy is nominated for
the governor of Serbia and Montenegro to
the European Bank for Reconstruction and
Development, while Montenegrin Deputy
Prime Minister for Financial System and Public
Spending is nominated as a representative
of Serbia and Montenegro in the Council
of Europe Development Bank. This Agreement
also provides for that the Governments
of the Republic of Montenegro and Republic
of Serbia shall support the equal membership
of the central monetary institutions to the
Bank for International Settlements.
Coming back of Serbia and Montenegro
(SaM) to the international financial community,
which started by renewal of the membership
to the International Monetary Fund,
World Bank, European Bank for Reconstruction
and Development and other institutions,
also continued in the course of 2002 and
2003, by means of regulation of debt to the
Paris Club creditors. Agreed minutes on consolidation
of the FRY debt to the Paris Club
creditors was signed in Paris on December 28,
2001. Pursuant to this document, bilateral
negotiations were launched with each Paris
Club member state respectively, which resulted
in signing of bilateral agreements with
certain member states of the Paris Club.
Negotiations with the London Club creditors
have been launched in 2001, and are
relating to the manner of regulation of the
FRY liabilities according to the New Financial
Agreement (NFA) and Trade and Deposit Facility
Agreement (TDFA) from 1988. Debt to
this category of creditors amounted about
US$2,4 billions. Negotiations with the commercial
banks-creditors are being conducted
through the banks' Advisory Committee (previously
International Co-ordination Committee
- ICC), which is established for the purpose
of the negotiations and is comprised of the
largest banks-creditors.
Several rounds of the negotiations were
held in 2002 and 2003, during which the Yugoslav
part tried to achieve as favourable conditions
for the debt servicing as possible, i.e.
rescheduling conditions that are compatible
with the conditions agreed with the Paris
Club creditors1, as regards a level of the debt
write-off (66% of the net present debt value),
repayment period and level of interest rates
to be charged on the remaining debt amount.
However, such conditions were not acceptable
for the London Club creditors. Offers that
the London Club creditors made to the Yugoslav
part were unacceptable not only because
Jadranka Radunović
of the fact that under the offered conditions
SaM would be unable to service its obligation,
but also because the acceptance of such
conditions would mean disruption of the
agreement with the Paris Club creditors, under
which the state assumed the obligation
to reschedule its debt to other creditors under
the similar conditions that were agreed
with the Paris Club creditors.
Negotiations with the London Club were
intensified in the first half of 2004, which led
to signing of the Framework Agreement with
the London Club Creditors - Memorandum
of Understanding on Debt Restructuring according
to the NFA and TDFA between the
Republic of Serbia and the International Coordination
Committee, on July 7, 2004. The
Memorandum was ratified in the National
Assembly of the Republic of Serbia on July 24,
2004, by promulgation of the Law on the Memorandum
Ratification.
The Agreement provides for a write-off of
about 62% debt and conversion of debt into
the bonds to be issued to the amount of
US$1.080 million. The debt is to be paid back
within 20 years period of time with 5 years
grace period and interest rate of 3,75% during
the grace period and 6,75% until the end
1 - Initially, the FRY delegation presented its request for write-off of 70% of the present debt value with repayment period of 25 years and 7-8 years of grace period
34

Co-operation with international financial institutions - IMF
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
of the repayment period.
As regards the public debt of Montenegro,
it is noteworthy that immediately prior
to regulating the relations between Serbia
and the London Club creditors (end June),
representatives of Serbia and Montenegro
signed a Proposal for Regulation of Mutual
Rights and Liabilities of the Republic of Serbia
and Republic of Montenegro to the London
Club Creditors. Under the Proposal,
which was adopted by the Commission for
Property, Serbia and Montenegro agreed that
the Republic of Montenegro should be released
from obligations stemming from the
NFA, on the account of its debt buy-back in
the course of 1992. The Proposal also provided
for that the Republic of Montenegro
should be released from obligations stemming
from the TDFA and API if it furnished
the National Bank of Serbia with evidence on
the debt that was bought-back.
Co-operation of the Government of the
Republic of Montenegro with international
financial institutions has been increasingly
intensified over the last couple of years.
Grants and credit funds provided by the international
financial institutions are mainly
used for improving macro-economic environment,
related legislation, implementation of
the institutional reforms etc, all of which is
aimed at creation of an environment which
would attract investors for the purpose of
economic growth and development.
The Government of the Republic of Montenegro
has the most intensive co-operation
with the following international financial institutions:
International Monetary Fund
(IMF), World Bank (International Financial
Institution - IFC, International Bank for Reconstruction
and Development - IBRD, International
Development Association - IDA), European
Bank for Reconstruction and Development
- EBRD, European Investment Bank
- EIB, Council of Europe Development Bank,
Kreditanstalt für Wiederaufbau - KfW etc.
"MONTENEGRO AND IMF CO-OPERA-
TION
International Monetary Fund (IMF) was
established in the Bretton Woods Conference
held in 1944 in New Hampshire (USA), when
the governments of 44 countries agreed to
establish the Fund. The IMF started its work
in December 1945, with 29 member states. In
the years to come, the number of the IMF
member states continually increased, reaching
the number of 184 member states in
2005.
International Monetary Fund represents
a central institution of the international monetary
system. It was established with the
aim to improve international financial cooperation,
speed up national economic
growth, develop international trade, increase
employment and provide financial assistance
International Monetary Fund
to the countries for the purpose of improving
balance of payments. The Fund also plays important
role in providing technical assistance
and economic advises to the governments
and central banks of its member states.
Ex Socialist Federal Republic of Yugoslavia
(SFRY) was one of the participating countries
in the Bretton Woods Conference (1944)
and one of the founders of the International
Monetary Fund and the World Bank.
With break-up of the ex- SFRY, its membership
to the IMF ceased to exist. Socialist
Republic of Yugoslavia (SRY) renewed its
membership to the IMF upon meeting the
conditions under which states successors
may succeed the SFRY membership to the
IMF. Pursuant to defined conditions, 36,52%
of the SFRY assets and liabilities to the IMF
went to SR Yugoslavia.
On December 20, 2000 the IMF Board of
Directors made a decision with retroactive effect
as of December 14, 1992 that SR Yugoslavia
met conditions for a membership to this
institution. The same day, the Board approved
SR Yugoslavia 116,9 million SDR in the
framework of "urgent post-conflict assistance",
as a support to the program of economic
stabilization and institutional and administrative
rehabilitation. It was from these funds
that SR Yugoslavia paid back the bridging
loan amounting 101,1 million SDR, which
were approved by Switzerland and Norway
for settlement of the financial liabilities to
the IMF.
In mid 2001, the IMF approved the SRY a
Stand-by loan as a support for the Federal
Government economic agenda. Funds provided
for under the said agreement with the
IMF were used for provision of foreign exchange
reserves and improvement of the balance
of payments. Given that Montenegro
officially has no currency of its own but uses
Euro instead, it is not a beneficiary of the
funds approved under the Stand-by Agreement.
Results of the implementation of the
Stand-by Agreement program were assessed
according to the agreed quantitative performance
criteria such as: net foreign exchange
reserves of the National Bank of Yugoslavia,
net domestic assets, consolidated public administration
debt with the banking sector,
concluding new non-concession foreign
loans by public sector, assumption of the economic
sector debt to the banks by public sector
and prevention of accumulation of new
delays by virtue of foreign debt servicing; results
were also assessed according to structural
measures in the fiscal, financial and private
sector.
In May 2002, the IMF Board of Directors
approved a three-year financial agreement socalled
the Extended Fund Facility for the State
Union Serbia and Montenegro as a support
for the economic stabilization and reform
agenda for the period 2002-2005.
Conclusion of this financial agreement
with the Fund enabled implementation of
the first phase of reduction of the SR Yugoslavia
debt to the Paris Club creditors to the
amount of 51% of the debt.
The IMF representatives conducted six semiannual
revisions of the three-year agreement
in order to verify whether the conditions
were met. On the basis of the five revisions
done, 11 tranches were drawn. The sixth
and last revision was conducted in December
2005 and the report on the revision results
will be adopted by the IMF Executive Board
in January 2006. If the report is marked positively,
remaining funds under the Extended
Fund Facility should be drawn and debt to
35

Co-operation with international financial institutions - IMF
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
the Paris Club creditors should be additionally
written-off to the amount of 15% of the total
debt (which makes it about 26 mil eur for
Montenegro).
It is very important for Montenegro to
maintain co-operation with the IMF, which is
mainly done through its abiding by the conditions
provided for under the agreement
with the IMF. According to the said agreement,
Montenegro is to: reduce budget expenditures,
reduce budget deficit, downsize
the number of employees in the public sector
and cut budget payroll, implement privatization
of the companies where the state has its
shares with maximum level of transparency
and accountability, reform the banking sector,
stimulate the legislation framework of
the financial sector, change the level of VAT
for certain goods and services, maintain low
inflation rate, reduce foreign debt, pay outstanding
liabilities to pensioners and social
welfare users, amend the Law on Budget,
adopt the Republic Budget for 2006, determine
the limit of borrowing by virtue of credits
from the international financial institutions
etc.
Montenegro achieved significant results
as regards fulfilling the above obligations.
Certain number of state-owned companies
(KAP, Telecom etc.) was privatized, while privatization
of other companies is announced
for 2006. Reform of the banking sector is also
underway, with completed privatization of
Montenegro Banka and Podgorička Banka,
while Pljevaljska Banka and Nikšićka Banka
are to be privatized, upon which the banking
sector would be fully privatized in the first
half of 2006.
Over the past years, significant progress
was also made in other fields identified under
this agreement, primarily in the field of
macroeconomic stability. In 2003, GDP was
1.433 mil eur and in 2004 it was 1.535 mil
eur, which makes nominal growth of 7,1%,
while real growth rate was 3.7%. Projected
GDP amount for 2005 is 1.644 mil eur,
which means a planned real growth rate. At
the same time, GDP per capita is continually
growing. In 2003, GDP per capita was 2.473
eur, and according to the projections under
the Economic Reforms Agenda for 2005, it is
Table 1. Outline of non-concession loans signed in 2005
planned to be at the amount of 2.638 eur.
There was a noticeable progress in the fiscal
policy in 2005. Level of the public debt of
the Republic as of November 30, 2005 amounted
658,08 mil eur or 40,3% of GDP, out of
which 508,08 mil eur or 30,91% of GDP was
foreign debt and 150,00 mil eur or 9,12 % of
GDP was domestic debt. The largest part of
the foreign debt (82%) is related to the succeeded
debt of the SFRY and SRY to the IBRD
and the Paris Club creditors, while the major
part of the domestic debt (78,66%) is related
to old foreign currency savings. Public spending
deficit in 2005 will amount 2,62% of
GDP, while the Republic budget deficit will be
at the level of projected of 2,17% of GDP,
which is within the limits of the allowed budget
deficit applicable for the Euro zone. Foreign
direct investment is also increasing,
which provides a basis for future growth. Foreign
trade field is marked by increased turnover,
together with foreign trade deficit,
which is decreasing. Inflation rate was 1,7%
during eleven months of 2005, while in 2002
it was 9%.
In 2005, Republic borrowing limit was
obeyed, on the basis of non-concession credits,
which was determined to the amount of
US$32 mil or 26,5 mil eur by the IMF, as given
in the following Table:
In mil. eur
LOAN DATE OF AMOUNT
SIGNING
1 EBRD loan for reconstruction of regional roads 15.07.2005. 11.50
2 EBRD loan for modernization of the flight control 27.02.2005. 2.68
3 EIB loan for modernization of the flight control 10.06.2005. 2.72
4 EIB loan for rehabilitation of roads and bridges 12.12.2005. 9.00
TOTAL: 25.90
Source: Ministarstvo finansija
Montenegro will carry on with the launched
reforms in the forthcoming period in
order to improve its economic position, according
to the agreement with the IMF. Although
it is not a beneficiary of the approved
funds, keeping in line with the agreement is
of particular importance for Montenegro,
because it represents a verification of stability,
sustainability and improvement of the
credit rating. Existence of this agreement is a
prerequisite for further reduction of the
Montenegrin debt to the Paris Club creditors.
Negative effects of a possible breach of the
agreement with the IMF because of default in
obligations by any State Union member state
would result in suspension of relations with
the World Bank, which would have harmful
effects on financial co-operation with other
international financial institutions, including
governments of other countries and economic
entities.
The IMF Revisions confirmed that the
Republic of Montenegro met the necessary
conditions and adjusted its policy with the
signed stand-by agreement, thus meeting the
conditions for its successful completion. Negotiations
about a new agreement with the
IMF and definition of mutual relations will
be a challenging task in 2006, in the light of a
new institutional arrangement of Montenegro
after the referendum.
Dragan Darmanovic, Jadranka Radunovic i Natasa Kovacevic
SECTOR FOR ECONOMY, FINANCE,
INTERNATIONAL CO-OPERATION
AND GAMES OF CHANCE SYSTEM
DEPARTMENT FOR INTERNATIONAL
CO-OPERATION
AND EU INTEGRATION
Jadranka Radunović
Nataša Kovačević
Dragan Darmanović
Tel: 081-225-913
E-mail: mf@mn.yu
36

Capital market of Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Capital market of Montenegro
- further institutional development
In Montenegro during past several years,
and especially during the 2005, there has
been an expansion of the turnover at the
capital market. The total turnover for the
previous year was around 4% GDP, which represents
very high percentage and shows
that Montenegrin capital market becomes
more and more attractive for foreign investments.
The total capitalization at the end of
2005 was around 1.3 billions eur, which indicates
the significant potential for further development
of the capital market.
The rising number of subjects which participate
in the transactions at the capital
market, out of which large number are minority
shareholders, called for the enacting
of the Law on Taking-over of Joint-stock
Companies, so that their interests could be
protected. The level of development of the
market was the basic motive for the passing
of the Draft Law Amending and Supplementing
Law on Securities. Those two laws were
also prepared because of the obligation that
regulations in the capital market should be
precisely harmonized with the EU regulations
in the process of European integration.
"The Law on Taking-over of Joint
Predrag Stamatović
Stock Companies" clearly defines terms
and procedures which impose to the investors
that exceed the stipulated limit (substantial
shareholder with 40% of the stocks)
the obligation of mandatory tender for takeover.
This way minority shareholders are protected
and if they do not want to be the share-owners
anymore they can sell them at any
price which is, as a rule, significantly higher
than the price they would get in the case
when there is no take-over. Supervision over
the implementation of the take-over process
is clearly defined and entrusted to the Securities
Commission.
"Draft Law Amending and Supplementing
Law on Securities" is mostly made
because of the fact that in the period from
passing of the Basic Law (2001) numerous
directives of EU were adopted which comprehensively
regulate these matters.
Beside the equity securities, which were
the dominant part of the turnover at the capital
market in Montenegro, this Law also
defines debt securities and stipulates the
procedure of their issuance and trading.
Two new important things are the introduction
of the closed bid of securities and offering
to previously known acquirers.
When we talk about the closed bid of securities,
trade of stocks which are the object
of such bid will not be performed on the
stock exchange. Having in mind that it is partial
abandonment of the principal which was
the foundation for the Basic law, this law
clearly defines the cases in which dealing in
shares outside the stock exchange is allowed
and those are:
- all transactions in the primary trade
during the new issue of shares
- on the occasion of the trade between
existing shareholders on the base of preemption
right
- on the occasion of the simultaneous
founding of the joint stock company
- when the buyers are professional investors
- when the buyers are at most 30 previously
determined persons, obliged to buy the
whole issue
- when the issue is issued in the amount
not higher than 40.000,00eur.
Contrary to the past solution, which prohibited
the division of dividend to the shareholders
of the stock exchange, this Law erases
this prohibition.
When we talk about the institutions of
the capital market this law for the first introduces
the possibility of establishment of custodians
in Montenegro- specialised financial
institutions which keep securities for third
persons. These institutions can do business
as sub-custodians, and Central Depositary
Agency will be performing the role of the
central custodian. This kind of solution is
right if we have in mind the size of the market,
and is also confirmed by comparable experiences.
Experience of Montenegro in this sphere
shows how significant role of the capital
market in the total process of reforms is, and
also that it is a "living" process which should
be permanently monitored and institutionally-legally
upgraded.
ADVISOR TO THE MINISTER
Predrag Stamatović
Phone: 081-224-581
E-mail: mf@mn.yu
37

Insurance department in Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Insurance department in Montenegro
Table 1: state of capital and safety reserves, 2002-2004, in thousands of eur
Insurance company 2002. 2003. 2004.
1. "Lovćen" 11.562 14.349 14.682
2. "Montenegro" 2.840 3.474 4.107
3. "Swiss" 1.478 1.936 1.965
4. "Zepter" - 256 132
5. "Grawe" - 923 940
5. "Lovćen-Re" 1.212 2.102 2.674
Table 2: realised gross premium, 2002- 2004, in thousands of eur
Društvo za osiguranje 2002. 2003. 2004.
1. "Lovćen" 18.460 20.307 20.075
2. "Montenegro" 3.815 4.492 4.9o9
3. "Swiss" 608 792 1.062
4. "Zepter" - 9 42
5. "Grawe osig." - - 29
Total : 22.883 25.6oo 26.117
Table 3: realised gross premium per type of insurance, 2002- 2004, in
thousands of eur
Type of insurance 2002. 2003. 2004.
Obligatory insurance 9.512 12.216 13.347
Property insurance 9.818 8.923 6.929
Accident insurance 3.535 4.370 5.397
Life insurance - 91 444
Milanka Obradović
Biljana Doderović
In the Republic of Montenegro is still into force the Law on Insurance
of Property and Persons in the FRY from 1996, (Official gazette of
the FRY no. 30/96) and the Decree on Insurance of Property and Persons
(Official gazette of the Republic of Montenegro 42/00), passed by
the Government of the Republic of Montenegro for the purpose of protection
of economic interests of the Republic. With this Decree the measures
of control of the insurance are taken from federal authorities and
transferred to the Ministry of Finance of the Republic of Montenegro,
and it is stipulated that only insurance organizations, registered as a legal
person in Montenegro can operate in Montenegro. That way, the insurance
market in Montenegro was considerably organized.
When the Decree entered into force 2000, only three insurance
companies and one reinsurance company continued to do business. In
the year 2003, "Zepter insurance" a.d. Podgorica got operating permit
from the Ministry of Finance, and "Grave insurance" a.d. Podgorica in
2004. So, at the end of 2005, in Montenegro operated following insurance
organizations: "Lovćen" a.d.Podgorica, "Montenegro" a.d.Podgorica;
"Swiss" a.d. Podgorica; "Zepter insurance" a.d. Podgorica and joint
stock company for reinsurance "Lovćen-re" Podgorica.
"Lovćen" and "Montenegro" insurance have operating permit for
operations with property insurance and accidents, obligatory insurance
and life insurance; "Zepter" insurance is only registered for life insurances
and "Grawe" insurance for operations with property insurances
and accidents and life insurances.
In the total capital of insurance companies there is a significant
share of foreign capital, and that is: in "Lovćen osiguranje" 49,53%; in
"Grawe insurance" 100% and in "Zepter insurance" 100% (from Serbia).
Following tables show the state of capital and safety reserves, realised
gross premium and realised gross premium per type of insurance
for the period 2002- 2004
As can be seen from the stated data total gross premium has slight
growth tendency. Typical for the market of Montenegro is a small percentage
of realised life insurances, and that is the result of many factors-
although one of the main reasons is rather low living standard. It
is the same with the voluntary pension and health insurances, which
are not performed by any insurance company in the Republic. One could
expect this situation to be improved in the following period, having
in mind new legal solutions and more and more dynamic reforms in
the sphere of pension and health system, and the total economic development
of Montenegro.
As for the paid compensations for damages, on the base of data and
performed controls, it can be stated that during the past three years
there were no "excess" behaviours of risk, realised competent technical
premiums and competent damages i.e. damages were paid out in the
optimal amount of around 70% of the technical premium.
The New Insurance Law, which is in the Parliament procedure and
whose adoption is expected to be at the beginning of 2006, should
bring new and long expected impulse to the development of the insurance
department in Montenegro. Draft Law is mostly harmonized
with the standards which exist in the developed market economies,
first of all with the international standards for supervision in the insurance
and with the Directives of the European Union in that area. The
matter, which is of great influence to creation and maintenance of
healthy insurance department, is the establishment of appropriate regulatory
and monitoring body. The Law stipulates that those jobs should
be done by the Agency for control of insurance with the status of legal
person, which is independent and is founded by the Government of
the Republic of Montenegro.
The Law stipulates the types of insurance, the possibility of providing
services in the voluntary pension and health insurance. The lowest
capital was stipulated and it amounts for life insurances 800.000eur
and for other insurances from 500.000 to 2.250.000eur and for reinsurance
business 2.000.000eur.
Obligatory insurances in traffic are regulated by special law, which
is also in the procedure and should be adopted at the beginning of the
2006. With adoption of these two legal provisions legislation in the insurance
department would be completed, which would make the total
financial system to be more stable- and to have stronger base for faster
growth and development.
SERVICE FOR INSURANCE CONTROL
Milanka Obradović, Biljana Doderović
Phone: 224-248
E-mail: mf@mn.yu
38

Public procurement in Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
PUBLIC PROCUREMENT IN MONTENEGRO
- Accomplishments and challenges -
"Harmonization of methods in the
field of public procurement is not only
one of important conditions for the European
Union accession process, but also a
condition for creation of suitable environment
for free market competition, and at
the same time unfavourable environment
for corruption and organized crime"
Public procurement and its legalistic determinants,
and consistent implementation
of legislative regulations in the area of public
procurement, are one of the most important
barriers to the corruption, organized crime
and inappropriate spending of budgetary
funds. If we have in mind the amount of resources
which the Republic of Montenegro
earmarks annually for needs of public procurement,
it is clear that the game rules in the
field of public procurement must have high
level of quality, which can be achieved first of
all by equal treatment of all participants in
the procedure of public procurement, which
appear as bidders before the state, and which
affects in a stimulating manner to the reduction
of a allocated for public procurement.
In that context, the Law on Public Procurement
is an act of law, which enables functionality
and transparency in public procurement
methods and finally, a n act of law
which represents for Montenegro a big step
towards the harmonization of legislations
with European legislations, which is important
movement towards the final, long and
difficult road of approximation of domestic
with the legislations of the European Union.
Harmonization of national systems of
public procurement is one of the most important
instruments for existence of internal
market and removal of obstacles for free trade
within the European Union. Open, undiscriminating
and transparent methods also
support positive competitiveness among the
firms that operate at the public procurement
market. Only economic societies which compete
to foreign companies are able to be fully
and efficiently successfully present at the
foreign market, and to resist to the competition
of foreign companies in Montenegro.
Precisely because of that, legislative regulations
of public procurement, demand continuing
promotion and dynamic approach,
which always has to be one step in front of
the sophisticated forms of corruption and
organized crime.
In spite of certain progress in the field of
public procurement regulations in our country,
there are some imperfections which could
result in practice with getting around the
legal norms and their misinterpretation, and
inconsistency of implementation.
For the purpose of removal of imperfections,
it is necessary first of all to:
• Harmonize regulations in the field of
public procurement with the directives of EU;
• Define important institutes in the
field of public procurement;
• Specify competence of authorities in
the public procurement process;
• Establish precise criteria for selection
of bidders, define method and procedure for
award of contracts for all types of public procurement;
• Form unique data base on public procurement;
• Define penalty clauses for criminal
acts for participants of public procurement
(ordering parties and bidders);
• To educate ordering parties and bidders.
After several years of implementation, in
spite of shown weaknesses of the system, we
come to unavoidable conclusion that the legal
regulations in the field of public procurement
are progressive and lately significantly
improved. Self-consciousness that the modern
legal system must strive to finding new
legal solutions for more and more complex
deviations which can appear, and for obstacles
in carrying out of public functions, for
illegal realization of own interests, is the additional
motive for improvement of legal regulations
in the field of public procurement.
For the overcoming of the problem and
removal of flaws of the existing public procurement
system in the Republic, it is necessary
to start the process of improvement of public
procurement in Montenegro by defining
activities of high-priority, introduction of
new and improvement of existing institutes,
which will enable realization of strategy and
goals set by enacting the new Law.
Vision of public procurement policy is
the reform of public procurement system,
through the improvement of the system- respecting
the principle of transparency, competition
and equal rights of bidders, and in
accordance with demands and expectations
of all subjects- persons under obligation of
the Law, with establishing of overall, functional
and coherent system based on principles,
which are non-discriminatory and based on
respect of proposed legal solutions.
Reform of public procurement system
has two basic objectives:
1) Simplification of the procedure and
clarification of rules
2) Modernization of rules, where the
priority would have economically best choice,
when compared to the bidder who offered
the lowest price.
Katarina Radović
SIMPLIFICATION OF PROCEDURES,
CLARIFICATION OF RULES AND
HARMONIZATION WITH EUROPEAN LAW
New Public Procurement Law is harmonized
with EU Directives, international practice
and legislative solutions in the region,
which will significantly affect realization of
one of the basic principles of acquis communautaire
- free movement of goods, services
39

Public procurement in Montenegro
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
and capital, by establishment of conditions
for fair market competition and best value of
money.
Areas which were problematical in application
and which were differently interpreted
are more precisely processed: public procurement
methods, procedure of protection
of rights etc. Furthermore, complaint procedure
was regulated in details, the number of
persons with valid legitimation was stipulated,
course of the procedure at the first instance
organ and at the State commission,
period for submission of objections and
complaints, the way of decision making and
types of decisions. Decision of the State commission
is legally valid, the right of initiation
of administrative suit is excluded because the
administrative suit lasts long, and prolongs
the progression of the public procurement
procedure, which is by its nature urgent. Persons,
who are actively legitimated in the
complaint procedure in accordance with the
provisions of the Public Procurement Law,
can realize their right for compensation for
damage in regular courts in the civil procedure.
Similar practice is introduced in the legislation
in the field of public procurement
in the countries in the region.
MODERNIZATION
The objective of the reform is approximation
to the EU Directives, the best international
practice and opening for new information
technologies. Speed of introduction of
new legal norms allows that practices of public
procurement gain new possibilities from
information technologies. That means that
entrance into transactions electronically and
in some cases realization of the whole procedure
of public bidding.
Modernization is also reflected in the establishment
of special administration authority,
which would be formed by the Government
of the Republic of Montenegro, in order
to establish conditions for economical, efficient
and transparent usage of funds for public
procurement and creation of competitive and
fair conditions, for all bidders. Establishment
of special authority, is the realization of the
obligation determined by the Directive
18/2004, which stipulates that independent
entity which secures the enforcement of the
law must be formed in all countries. Special
authority, exists in all neighbouring countries,
and all EU countries and it represents, besides
State commission, main subject of the public
procurement system.
Recommendations from the European
partnership related to public procurement
contain the obligation of providing the implementation
of consistent and efficient public
procurement system in Montenegro,
and strengthening of administrative capacities
of the competent authority of administration
and of the State commission. Furthermore,
in accordance to the Recommendations,
it is necessary to provide transparency
of procedures, regardless of the value
of the contract in question and to completely
avoid in that way discrimination of bidders.
Mentioned recommendations are completely
incorporated in the text of the new
Public Procurement Law. Experiences of
countries in the region show that all countries
meet those conditions and have established
independent administrative bodies,
as a separate organs for rights' protection
(Croatia - Office for public procurement and
State commission for public procurement,
Bosnia and Herzegovina - Agency for public
Procurement and Office for Consideration of
complaints, Serbia- Public Procurement Office
and Commission for Protection of Rights,
Macedonia - Office for Public Procurement
and Commission for Protection of Rights, Albania
- Office for Public Procurement and
Commission Protection of Rights, Bulgaria,
Hungary, Moldavia etc.)
Further, Feasibility Study anticipates that
Montenegro should do more in order to reform
the administrative bodies for Public
Procurement, to provide budgetary sustainability
and the development of stable, professional
and independent State commission.
For that objective, the new Law stipulates the
establishment of the institutional framework
for conduction of efficient and transparent
public procurement system, through
the public entity and the State commission.
However, besides the improvement of
the Public Procurement Law, it is necessary
to strengthen mechanisms for monitoring
and control of public procurement, which
minimise the possibility of getting around
legal regulations. The necessary measure for
consistent implementation of the Law implementation
is education of subject involved
in public procurement procedures, of ordering
parties on one side, and of bidders on
the other side. That kind of education would
eliminate the larger number of variations of
the interpretation of regulations and, as a result,
it would have a clear practice which
would strengthen fair-play, not only between
ordering party and bidder, but also between
bidders themselves.
Finally, starting from the previous experience
and comparative legal researches, we
come to a conclusion that the State, which in
the public procurement procedures is a direct
participant at the market, has to respect
the basic principles of the market economy
and to ensure the free competition. Obligations
of countries pretending to become the
EU members, among them Montenegro, is
to consistently follow trends and changes in
the legal regulations in the field of public
procurement in European Union. Harmonization
of procedures in the field of public
procurement is not only one of more important
conditions for the process association to
European Union, but also a condition for the
creation of suitable environment for free
market competition, and at the same time,
unfavourable environment for corruption
and organized crime.
SECRETARY OF THE PUBLIC
PROCUREMENT COMMISSION
Katarina Radović
Phone: 081-231-624
E-mail: nabavka@cg.yu
40

Old foreign currency savings of citizens
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Sale of state-owned property
for bonds of old foreign
currency savings of citizens
Provisions of the Article 18 of the Law
on regulation of Commitments and Claims
Based on Foreign Debt and Foreign
Currency Savings of Citizens ("Official gazette
of the Republic of Montenegro",
no.55/03) is stipulated that old currency
saving bonds of citizens, before their maturity
period, can be used for purchase of
apartments, residential rooms, business
premises, land or other state property,
for which the Republic decides that can
be bought with bonds which are not due.
The same Article stipulates that the
Government defines closer terms for usage
of bonds before their maturity period.
FOR THAT PURPOSE, THE
GOVERNMENT ADOPTED FOLLOWING
DOCUMENTS:
- Decree on conversion of old foreign
currency saving of citizens to bonds
Natasa
Novakovic
("Official gazette of the Republic of
Montenegro", no. 42/04), which stipulates
that the Government of Montenegro,
upon the preposition of the Ministry
of Finance, determines terms and
procedure of sale of property in the period
of 3 months after the entering into
force of the Decree.;
- Decision on Bond Issue of the Republic
of Montenegro on the basis of foreign
currency of citizens ("Official gazette
of the Republic of Montenegro",
no.42/04), which determines the value
of issued bonds to the amount of 150
million eur, nominal value of one bond
of 1,00 eur and the maturity period for
payment starting with 1. July 2004. until
1. July 2007, and
- Decision on Terms and Procedure
of Purchasing of the Property of the Republic
of Montenegro with bonds of foreign
currency saving of citizens ("Official
gazette of the Republic of Montenegro",
no. 54/2005). With this Decision
all legal obligations towards owners of
bonds of foreign currency saving of citizens
are fulfilled and they are allowed to
purchase state-owned property for
bonds.
For the realization of those regulations,
Ministry of Finance had prepared
inventory of public ownership for purchase
with bonds of foreign currency saving
adopted by the Government, and
after that, on 21. November 2005, the
announcement was published for its sale.
The add comprised housing space of
22 m,2 business premises of 18 m2, land
of 8.429 m2, land of 170 m2 all in Budva,
land of 400 m2 and a warehouse of
8.260 m2 in Bar, apartment villas within
the complex of the hotel "Albatros" (business
buildings, 5.376 m2) and a yard of
500 m2 in Ulcinj, annex of the hotel
"Lokve" in Berane of 975 m2, workshops
within the "Eksportdrvo" in Kolašin of
6.708 m2, land of 52.373 m2 in Podgorica.
Value of stated property amounted
over 5,00 millioneur.
From the property was sold one
housing space in Budva of 22 m2 for
29.000,00 eur and business premises also
in Budva of 18 m2 for 21.600,00 eur.
For other announced property besides
the interest no offers were submitted.
Ministry of Finance will continue
with amendment of the inventory of
public ownership, which will soon be on
sale again.
SENIOR ADVISOR I
Nataša Novaković
Phone: 081-224-962
e-mail: mf@mn.yu
41

Implementation of Law on civil servants and State employees
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Bosa Pavićević
Olga Uskoković
Implementation of Law
on civil servants and
State employees and
Law on salaries of civil
servants and state
employees
In April 2004, ("Official Gazette of
RoM", No. 27/04), the Parliament of the
Republic of Montenegro adopted the
Law on Civil Servants and State Employees
and Law on Civil Servants and State
Employees' Salaries, which became effective
as of January 1, 2005. The two
Laws required adoption of new enactments
on job systematization within the
public administration agencies and classification
of servants into the salary grades,
whose objective is to evaluate educational
qualification, years of employment
and a passed professional exam as
a special prerequisite for becoming a civil
servant or state employee.
Ministry of Finance plays important
role in the implementation of these laws.
Namely, according to Article 14 of the
Law on Civil Servants and State Employees'
Salaries, the minister of finance makes
a decision on the fixed part of salary on
the basis of an enactment passed by a head
of the state authority on assignment
or promotion of civil servant to a higher
post or salary grade; the minister also
makes a decision on the variable part of
salary which is, according to Article 13 of
the Law intended to motivate civil servants
or state employees to achieve better
results in their work and discharge their
office with maximum efficiency.
Taking due account of the situation,
the Ministry of Finance made a decision
on the fixed part of the salary for about
80% of the public administration agencies
with which it has a continuous cooperation
through offering suggestions
on or interpretation of the laws. According
to the Law on Civil Servants and State
Employees' Salaries, the Ministry of Finance
shall keep central records on salaries
of civil servants and state employees.
Relevant data shall be provided by heads
of the state authorities, while a manner
of the record keeping, contents of the data
and forms shall be determined by the
Ministry of Finance in co-operation with
the Human Resources Management,
which keeps records on civil servants and
state employees. An accurate and updated
database on civil servants and state
employees' salaries is thus provided.
The Ministry of Finance also co-operates
with the Administrative Inspectors,
particularly in case of noncompliance
with the legal public announcement
procedure, nonfulfillment of the
systematization conditions and other
perceived omissions and, being a firstinstance
authority that decides on appeal
against the decision passed by the Ministry
of Finance, it plays important role
in the implementation of the General
Administrative Procedure Act.
Ministry of Finance will further improve
its co-operation with other state
authorities in all compatible fields, and
through the Payroll Accounts Sector, it
will ensure a more successful implementation
of the Law on Civil Servants and
State Employees and Law on Civil Servants
and State Employees' Salaries,
through, inter alia, providing further
education and professional training.
HEAD, PAYROLL ACCOUNTS SECTOR
Bosa Pavićević,
ADVISOR
Olga Uskoković
Phone:081- 245-479
e-mail: mf@mn.yu
42

Stable financing of the defence system
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Stable financing of the defence system
The Law on Budget for 2005 determines
the funds for defence to the amount of
41.645.290,98 eur or 8,27% of the total
budget, or 2,53 % of the estimated GDP of
the Republic of Montenegro.
During the 2005, the total stability in
the financing of the defence system was
accomplished, which is illustrated by the
following indicators:
- Payments from the budget amounted
40.611.008,03eur, or 97,52% when compared
to planned. With the settlement of liabilities
towards public companies the
percentage of budget execution was
106,30%
- Regularity of payments of wages to
those who work for the Army was provided.
Those payments were behind schedule
because of the surplus manpower and
because of the autonomous rise in salary
in 2004, which exceeded the possibilities
of the budget.
- Delays in payment of liabilities towards
suppliers and certain remunerations
to employees were eliminated. The
reasons for such delays start from 2003, or
from transition to the territorial principle
of financing, when around 2,5 millions
eur of outstanding debt were inherited;
- Social program for the surplus manpower
in army was fully financed;
- At the suggestion of the Ministry of
Finance of the Republic of Montenegro
the salary system for all army members at
the territory of Serbia and Montenegro
was stabilised and harmonized;
- Also, at the suggestion of the Ministry
of Finance of the Republic of Montenegro,
Accounting centre for Montenegro
was formed, so that payment orders will
be delivered from Podgorica instead from
Belgrade;
- Ministry of Finance of the Republic
of Montenegro, through the Ministry of
Defence of Serbia and Montenegro, started
a number of other measures significant
for more efficient and rational financing
of the defence system in the Republic
of Montenegro;
- The total transparency of the process
of planning and management of funds for
army and generally was provided, from
the aspect of financing, important preconditions
were created for the further reform
of the Army.
In accordance with the commitment
of the Republic of Montenegro to become
the part of the system of the collective security,
the goal is that the funds for the defence
to be planned according to standards
and criteria of the OUN, EU and the
recommendations of NATO, with the tendency
of their rationalisation.
In accordance with that tendency expenses
for defence were cut down in the
estimated GDP of the Republic of Montenegro,
from 2,53% in 2005 to 2,40% for
2006. The share of those expenses in the
budget was also reduced from 8,27% in
2005 to 8,15% for 2006.
As regards to the further allocation of
funds for defence it is planned:
- continuing of tendency of the cutting
down of expenses for defence and their reduction
to 2% of the GDP;
- standardization of the structure of
the expenses for defence in accordance
with the international standards;
Mijajlo
Savović, M.A.
- support to the social program- further
reduction of the number of those employed
in the Army and other structures of
defence, and the support to the solving of
status of institutions with army income,
- excluding from the budget the expenses
for financing of army pensions (which
were included for the first time in the
budget for 2006) and their including in
the Pension and Disability Insurance Fund
of Montenegro, which will with further
downsizing of number of remunerated
persons, create conditions for providing of
funds essential for necessary modernization
and furnishing of army, in accordance
with standards of "Partnership for Peace".
ADVISOR FOR THE DEFENCE
BUDGET IN THE MINISTRY
OF FINANCE OF THE
REPUBLIC OF MONTENEGRO
Mihailo Savović, M.A.
Phone: 081-244-467
E-mail: mf@mn.yu
43

Legislative activity
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Legislative activity of the
Ministry of the Finance
INTRODUCTION
In the period from October 1 to December
31, 2005, apart from preparation one of
the essential documents of the MN Government
- Budget of the Republic for 2006, many
significant legal projects were carried out in
order to establish additional macroeconomic
stability, improve and provide a more efficient
functioning of the financial system of
Montenegro, as well as to harmonize overall
regulations with the European Union Law, in
accordance with the European integration
process.
The Ministry of Finance had a very intensive
legislative activity, first of all on the level
of fulfillment of obligations defined by the
original and then revised Agenda of Economic
Reforms, in the sense of further development
of tax and customs policy, banking system reform,
capital market and property-rights relations
in order to bring about establishment
of a stable framework for attracting foreign
invesments and intensification of the overall
Montenegrin economy development.
The last quarter of 2005, apart from the
laws, included also preparation of many bylaw
acts, analytical studies and reports, aimed
at making more precize definitions and more
successful realization of capital segments
from the Work Program of the Government -
the Ministry of Finance for 2005.
Taking into account the dynamics of
adopting the legislative regulations, process
of implementation and fulfillment of almost
all committments set up in the plan for 2005,
it is realistic to expect realization of an even
more favourable and stable economic ambience
in the next year.
The forthcoming most significant legislative
projects adoption will contribute to it to
a great extent, in the framework of realization
of the Work Program for 2006 and Agenda of
Economic Reforms. The question is about a
set of property laws (especially the Law on Property-Rights
Relations), what is certainly
one of the very important conditions for attraction
and stability of foreign investments.
-CROSS-SECTION VIEW OF THE
LEGISLATIVE ACTIVITY DURING THE LAST
QUARTER OF 2005 -
Law on Amendments and Supplements to
the Law on VAT - Adopted in the Parliament
on December 6, 2005
"Reform of the entire banking system
of Montenegro directed towards establishment
of safety and stability as
well as increase in the banking system
efficiency and profitability, rezulted
in achieving very significant
results within a short-term: new legislative
regulative adoption, implementation
of the ownership transformation,
new bank management concept
adoption, bank products offer
increase.
Adoption of the Law on leasing, Law
on Amendments and Supplements
to the Law on Protection of Deposits,
Law on Bill of Exchange, during 2005
additionally contributed to complete
the set of legislative regulations
which regulate this area."
Ana Miljanic
Reduced rate of 7% is introduced to the VAT
system for the goods an services which were VAT
exempted according to the existing decisions (without
right to deduction), and for which tax rate is
reduced in most cases according to the European
Union standards. Application of the reduced rate
of 7% is proposed for the basic products for human
nutrition (milk, bread, fat, oil and sugar), medicines,
textbooks, water supply, accomodation
services in hotels and other products which are significant
for the citizens' living standard (Art. 26
and 27 of the applicable Law). The aforementioned
products i.e. services' taxes should not influence
increase in unit prices of the mentioned products
i.e. services, especially because the tax payer would
be entitled to the input VAT deduction at delivery
of the same. At the same time, this decision provides
for neutrality in the process of VAT application,
what is one of its basic pronciples, because input
VAT does not burden the expenses of tax payer's
operations (what is the case with the existing decision).
Law on Amendments and Supplements to
the Law on Customs Tariffs - Adopted in the
Parliament on December 6, 2005
One of the main reasons for adopting the Law
on Customs Tariff is conditioned by the necessity
to adjust the national Customs Tariff to the Combined
Tariff of the European Union, first of all as
regards its nomenclature. The adjustment obligation
is conditioned by the need to intensify foreign
trade exchange with the EU member states, as well
as fulfillment of one of the conditions for our
country's reception in the World Trade Organization.
Law on Customs Tariff consists of 97 headings
and 10.229 tariff items. Tariff items number,
in comparison to the existing decision (8.554 tariff
items) is higher by 1.675 tariff items, i.e. by
19,58%. Tariff Rates are expressed in percentage
amounts depending on the value of goods (ad valorem),
and range from 0% to 30%. The new Tariff
Rate is based upon the Harmonized System (HS -
2002) which represents universal classification system
which is used in tariff rates preparation. 10-figures
single identification code is given to each
product, as foreign trade exchange matter. The first
six figures represent Harmonized System (regulated
by the World Customs Organization), whereas
the seventh and eight figure represent tariff signs
adopted from the EU Combined Nomenclature.
These two figures are are single for all the EU member
states and other states which adopted this nomenclature,
including our country.
Law on Amendments and Supplements to
the Law on Excises - Adopted in the Parliament
on December 6, 2005
The Parliament of the Republic of Montenegro
adopted the Law on Amendments and Supplements
to the Law on Excises ("Official Gazette
of the Republic of Montenegro", No. 76/01)at
the third session of the second regular session in
2005, held on December 6, 2005, which has been
applied since January 1, 2006.
The most significant amendments, which were
provided by the provisions of the mentioned
law, are related to: time of beginning of the excise
duty calculation and payment obligation for cigarettes,
as well as the manner of marking the alcoholic
drinks and tobacco products with the excise
stamps.
It is envisaged by the Law to calculate the excise
duty for cigarettes at the moment of taking
over the control excise stamps, and this decision is
essentially different from the past decision according
to which the excise was calculated at the moment
of putting the tobacco products into free circulation
i.e. in the course of these products`sale to
end users (for domestic cigarettes and cigarettes
which are sent to excise warehouses).
Pursuant to the authorisations from the Law
on Excises (Article 11), the Government of the Republic
of Montenegro adopted the Decree on
Marking Tobacco Products and Alcoholic
Drinks with Control Excise Stamps, at the session
on December 29, 2005 ("Official Gazette of
the Republic of Montenegro", No. 82/05), which
regulates in detail the subject matter related to the
manner of marking the tobacco products and alcoholic
drinks with the stamps, manner and procedure
of approval, printing and issuance of the
excise stamps, and manner of keeping records
44

Legislative activity
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
"Law on Expropriated Rights Restitution
and Compensation, which was
adopted in April, 2004, regulated the
right of former owners to restitution
of property rights and other property
rights.
Steering Commettee of the Compensation
Fund adopted in November
2005 the Financial plan for the period
from October 1, to December 31,
2005, in which process the conditions
to start annuities payment by
the Fund, as compensation to the
former owners, were officailly met.
In November 2005, the Compensation
Fund made first six-month payments
to the former owners, and on
the basis of four legally valid decisions
of the Municipality Commissions
of Podgorica, Budva, Pljevlja i
Cetinje. The total amount of the first
six-month instalment paid to former
owners amounts to 20.861,46 Eur."
about destroyed, issued, used, damaged and unused
excise stamps for tobacco products and alcoholic
drinks.
Draft Law on Insurance - (in the parliamentary
procedure)
Draft Law is to the greatest extent adjusted to
the standards which exist in developed market
economies, primarily to the international supervision
standards related to insurance and to European
Union Directives in that area. The point
which has an impact on creation and maintenance
of a sound insurance sector is appointment of
the relevant regulatory and supervisory body. The
Law envisages that the Agency for Insurance Supervision
with a legal person status, which is independent
and founded by the Government of the Republic
of Montenegro, performs these activities.
The Law envisages types of insurance and introduces
the possibility to offer services in voluntary
pension and health insurance. It regulates the
lowest amount of capital, which amounts to
800.000 Eur for life insurance, for non-life insurance
from 500.000 to 2.250.000 Eur and for reinsurance
operations 2.000.000 Eur.
"Taking into account that in Montenegro, especially during 2005, capital market circulation
was expanded and the number of entities which participate in the capital market transactions
increased, the need was felt to adopt the "Law on Joint Stock Companies Takeover"
and the "Draft Law on Amendments and Supplements of the Law on Securities" in order to
protect their interests.
Draft Law on Amendments and Supplements of the Law on Securities - In addition to proprietary
securities, which were a dominant part of capital market circulation in Montenegro, this Law
defines also debt securities and regulates the procedure of trade and issuance of the same. Two important
novelties are also introduction of closed offer of securities and beforehand offer of securities to
the known acquirers. As regards the institutions of the capital market, this Law offers, for the first time,
the possibility to establish custodians in Montenegro - specialized financial institutions which keep
securities for the third persons. These institutions can operate as sub-custodians and the Central
Depository Agency will continue to be the central custodian.
"Law on Joint Stock Companies Takeover" clearly defines the conditions and procedure according
to which the investors who acquire more voting shares than the regulated treshold (40% of voting
shares) are obliged to carry out mandatory public invitation for takeover. Control over implementation
of the takeover procedure is clearly defined and given in charge to the Commission for Securities.
Mandatory insurances in traffic are regulated
by a special law, which is also in procedure and is
likely to be adopted by the beginning of 2006. Legal
regulative in the insurance sector would be
completed by the adoption of these two legal regulations,
what would support stability of the overall
financial system, and strenghten the base for faster
growth and development.
New Law on Public Procurement (in the
Government procedure) is adjusted to the European
Union Directives, international practice and legislative
decisions of the countries in region, what
will have a significant impact on realization of one
of the basic acqui communitaire principles - free
movement of goods, services and capital. This will
be provided by meeting the conditions for an
equal market competition and best values for money.
More precize analysis are done in relation to:
public procurement methods, procedure of protection
of rights etc. In addition, appeals' procedure
is regulated in detail, circle of persons who have
active identity cards is regulated, development of
the procedure in the first instance body and in the
State Commission, deadlines within which an objection
or appeal is filed, manner of decision-making
and types of decisions. The State Commission
decision is legally valid, and right to institute administrative
dispute is excluded, because it lasts
long and extends the development of public procurement
procedure, which is urgent by its character.
Obligation of the countries which tend to become
European Union member states, among
which is also Montenegro, is to follow consistently
trends and changes in the legal regulative in the
European Union public procurement area.
Law on Amendments and Supplements of
the Law on Administrative Taxes - adopted in
the Parliament on December 27, 2005
Amendments to the existing Law is conditioned
by extension of competences of certain republic
administration bodies and establishment of
new bodies whose actions and acts have not been
included in the existing tariff. One of the reasons
for the existing law amendments is conditioned by
the need to regulate taxes for actions and acts
(from the repubilcan competence) which are conducted
in view of diplomatic consular agencies.
This committment is especially actualized for the
reason that the Republic of Serbia amended this
Law on Republic Administrative Taxes in the way
that it determined different amounts for a number
of actions and acts (decisions on determining
citizenship, requests for registration in the register
of citizenship holders, consignment notes etc.)
which were regulated by the Federal Law on Administration
Taxes.The consequence of such decision
is that citizens of Serbia and Montenegro pay different
taxes in diplomatic-consular agencies (for
citizens of Serbia, according to the regulations of
that Republic, and for citizens of Montenegro according
to the federal regulation).
The Federal Law on Administration Taxes will
continue to be applied for actions and acts which
are at the moment under the competence of the
State Union of Serbia and Montenegro.
Administrative taxes payment obligation is regulated
for the requests submitted to diplomaticconsular
agencies for registration into the register
of citizenship holders and for acceptance of our republic's
citizenship.
It is not necessary to provide additional funds
from the Budget of the Republic in order to implement
this law. By application of the draft law, additional
revenues for the Republic Budget would
be provided, circa 500.000,00 eur at the annual level.
SPOKESPERSON OF THE MINISTRY OF FINANCE
Ana Miljanić
Phone: 081-224-581
E-mail: mf@mn.yu
45

Activities of the Minister
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
The most important activities of the
Minister of Finance
October-december 2006
29.12.2005. - Negotiations among the Trade Union Association,
Montenegrin Government and Union of Employers on the lowest
cost of labour: At the meeting, the participants in the tripartite negotiations
discussed the proposal of the Montenegrin Government and a redefined
position of the Union of Employers i.e. Decision to revise the General
Collective Agreement prior to resuming talks on fixing the lowest labour
costs. Representatives of the three parties reached an agreement on
the issue and assessed that a Working Group should be established, which
would take into consideration the provisions under the General Collective
Agreement and then suggest concrete solutions…
21 December 2005 -Montenegrin Minister of Finance Dr Igor
Lukšić on improvement of the credit rating of Montenegro "I am
pleased to inform you that Montenegro successfully completed its first revision
of credit rating with one of the two most renowned global agencies
providing credit rating analysis -Standard & Poor's from London. Within
the very first year, credit rating mark BB stabile was improved into BB positive.
Analysts of the Standard & Poor's Agency say that such improvement
is based on a significant progress in the economic and policy reforms
and strengthening of macroeconomic stability. They also highlighted
a successful privatization in key economic sectors… I would also like
to emphasize an expectation, which was very explicitly put forward -that
holding of a referendum and expected independence will not have an impact
on the political and economic stability"
23 November 2005 - Montenegrin Minister of Finance Igor
Lukšić and Hungarian Minister of Economy Janos Koka signed today
in Budapest a 15 mil EUR credit for improvement of the school
infrastructure in Montenegro. Repayment period of the credit is 13
years with 3 years grace period. "From the credit funds, four buildings
will surely be constructed in Podgorica. High Medical School is a priority,
then Kindergarten in Block V, the construction of which started in 1990,
then Public Education Bureau building, Examination Center and Vocational
Training Center and one elementary school building. If some funds re-
46

Activities of the Minister
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
main unused, another Secondary School building would most likely be
constructed also in Podgorica", Montenegrin Minister for Education and
Science Prof. Dr. Slobodan Backović said after signing of the Agreement.
23 November 2005 - Negotiations on a higher labour costs ended
with agreement. -Representatives of the Montenegrin Trade Union
Association, Government and Union of Employers, agreed that: the lowest
salary for all employees in the Republic of Montenegro may not be less
than 130,00 eur; lowest cost of labour in the Republic of Montenegro is
fixed at the amount of 52,00 eur for December salary and 53,00 eur as of
1 August 2006 at the latest. This lowest cost of labour will be a base for
payroll accounts in accordance with coefficients under the General Collective
Agreement; tripartite working group responsible for revision of the
General Collective Agreement will be established within 3 days from the
day of adopting these principles. Participants in the negotiations will establish
a working group which will, by the end of the first quarter of 2006,
suggest amendments to the Law on Personal Income Tax by introducing a
unique proportional rate not exceeding 15%, which will have no adverse
effects on the Budget or increase of projected budget deficits
Director for Europe, Jean Didier Réigner. - Minister Lukšić informed
the quests about main macroeconomic indicators, saying that the inflation
rate is at a projected level for current year; budget deficit and public
debt have strong tendency to decreasing; sources of budget revenues are
stabile; unemployment rate is below 20%; and the GDP achieved a real
growth of about 5% in the first half of the year according to the Ministry's
assessments.
25 October 2005 - Statement of Finance Minister Igor Lukšić
on signing of the Agreement on Sale of Block of Shares of Podgorička
banka a.d. Podgorica to the company " Société Générale " from
Paris - Minister Lukšić expressed his pleasure over signing of the Agreement,
describing it as an important step both as regards regaining the citizens'
confidence in banks in Montenegro and overall reform and growth
of the banking sector. He also said that it serves as a proof that general
15 November 2005 - Methodology for fixing lowest cost of labour
adopted -
Finance Minister Dr Igor Lukšić: "In case of a linear rise in labour
costs, it is those with the highest salaries who will make good use of it. According
to our opinion, it is a problem to apply such principle. You know,
upon rise in the lowest cost of labour, it is the Finance Minister who gets
a much higher salary than employees in the lowest salary grades, who we
are trying to protect while fixing the lowest cost of labour." "We should
fix a lowest labour costs acceptable, and then create a wider room for future
talks on cost of labour in each respective sector in the non-economic
field".
14 November 2005 - Cetinje: Opening speech of Finance Minister
Igor Lukšić at the Conference- "Regional Protection of Intellectual
Property - Challenges in Protection of the Intellectual Property
Rights" -
Montenegro is "ready to take measures" at combating illegal trade in
intellectual property. We are aware that a future of reforms depends on
investment inflow and significant investments are possible only in those
economic systems with a high level of rule of law and protection of private
property".
25 October 2005 - Finance Minister Igor Lukšić held talks with
French Ambassador to SaM, Hugues Pernet and Société Générale,
investment risk in Montenegro is decreasing and expressed his confidence
that signing of the Agreement with one of the largest European banks
Société Générale and its entry
to the Montenegrin
market will increase competitiveness
in our banking
system. "By concluding the
Agreement we are making a
huge progress in restructuring
of the banking sector,
because almost about 90%
of the capital in the banking
system has been privatized",
47

Activities of the Minister
BULLETIN OF THE MINISTRY OF FINANCE/OCTOBER-DECEMBER 2006
Minister Lukšić said.
24 October 2005 - Finance Minister Igor Lukšić held regular
press conference - ''Set of new laws adopted in the previous period, privatization
process in a full swing and launched structural changes in the
social insurance system confirm that Montenegro is entering a final phase
of its transitional process. Successful accomplishment of tasks defined
first under the original and then recently revised Economic Reforms
Agenda enables continuation of the process and facing post-transitional
challenges such as, inter alia unemployment and a high share of public
spending in the GDP…"
Montenegrin Ministry of Finance, Fraser Institute from Canada and Center
for Entrepreneurship and Economic Development (CEED) organizes
on Tuesday, 18 October 2005 a Conference - Economic Freedoms and Future
of the Region. The aim of the Conference is to encourage efforts and
find solutions for enhancement of conditions for a faster economic
growth. It is the first time that the Fraser Institute presents index of economic
freedoms in a South East European country and for the first time
data about Montenegro are published, which is according to the Fraser
Institute methodology, put on 86th place (together with Croatia) among
127countries covered under the study
14 October 2005 - Finance Minister Igor Lukšić signed Additional
Memorandum of Understanding between European Community
and SaM - The Memorandum is a basis for granting additional macro-financial
assistance by the European Community to the amount of 70
million EUR (25 mil. EUR loan and 45 mil. EUR grant) for Serbia and
Montenegro, aimed at providing support to economic stabilization and
the reform agenda. 10% of approved funds are planned for Montenegro
and 90% for Serbia.
PR SERVICE OF THE MINISTRY
SPOKESPERSON, Ana Miljanic
SENIOR
EMPLOYEE I,
Maja Basic
Phone:
081-224-581
E-mail:
mf@mn.yu
17 October 2005 - Finance Minister Lukšić participated at the
Conference - Economic Freedoms and Future of the Region - Montenegrin
Investment Promotion Agency (MIPA) in co-operation with
48