Economy of Montenegro

History

As a relatively small principality and kingdom, Montenegro made its first steps towards an industrial economy only at the turn of the 20th century. The causes for this relative delay lay in the small population, lack of raw materials, underdeveloped transport network and comparatively low rate of investment. However, this delay in industrialisation had its positive effects - Montenegro survived as a specific ecological oasis.

The first factories were built in Montenegro in the first decade of the 20th century, followed by wood mills, an oil refinery, a brewery, and electric power plants. This brief evolution of industrial economy was interrupted by new wars - First Balkan War (1912-1913), followed by World War I and World War II. Between the two world wars, agriculture maintained its dominant position in the national economy, while the sole remaining industrial plants were wood mills, tobacco factories, breweries, and salt works.

Post-War Period

The economy made major progress only after World War II. Once more destroyed and plundered, Montenegro made greater strides in its economic policy and development, thus laying the foundations for modern and prosperous economy. During the communist era, Montenegro experienced a rapid period of urbanization and industrialization. An industrial sector based on electricity generation, steel, aluminum, coal mining, forestry and wood processing, textiles and tobacco manufacture was developed, while trade, international shipping, and particularly tourism became increasingly important by the late 1980s.

Post-Yugoslavian Period

The loss of previously guaranteed markets and suppliers following the break up of Yugoslavia left the Montenegrin industrial sector reeling as production was suspended and the privatization program, which had begun in 1989, was interrupted. The disintegration of the Yugoslav market, and the imposition of UN sanctions in May 1992 were the causes of the greatest economic and financial crisis in Montenegro since World War II. During 1993, two thirds of the Montenegrin population lived below the poverty line, while frequent interruptions in relief supplies caused the health and environmental protection to drop below the minimum of international standards. The financial losses under the adverse effects of the UN sanctions on the overall economy of Montenegro are estimated to be approximately $6.39 billion. This period was marked by the second highest hyperinflation in the history of humankind (3 million percent in January 1994).Fact|date=February 2007

Due to its favourable geographical location (it had access to the Adriatic Sea and a water-link to Albania across Lake Skadar) Montenegro became a hub for smuggling activity. The entire Montenegrin industrial production had stopped, and the republic's main economic activity became the smuggling of user goods - especially those in short supply like petrol and cigarettes, both of which skyrocketed in price. It became a de facto legalized practice and it went on for years.

Divergence from Serbian Influence

In 1997, Milo Đukanović took control over the ruling party DPS and began severing ties with Serbia. He blamed policies of Slobodan Milošević for the overall decline of the Montenegrin economy. The Montenegrin government adopted the German mark in response to resurgent inflation, and insisted on taking more control over its economic fate. This eventually resulted in creation of Serbia and Montenegro, a loose union in which the Montenegrin government assumed predominant responsibility for its economic policies.

This was followed by implementation of faster and more efficient privatization, passing of reforming legislation, introduction of a VAT and adoption of the euro as Montenegro's legal tender. The government established a medium-term plan of economic reforms, popularly referred to as "The Agenda".

Despite implementation of reform laws and privatization of most of publicly owned companies, the living standard of Montenegrins did not improve significantly during this period. The government, with Milo Ðukanović still as the Prime minister, blamed the slow progress on Serbia. Some arguments used to support this position were that foreign debt was higher in Serbia by one third, that unemployment was significantly lower in Montenegro. It was also argued that troublesome cooperation of Serbian government with the Hague war crime tribunal, ongoing Kosovo status process and general political turmoil in Serbia were hampering Montenegro's attractiveness to investors and delaying its progress towards full membership in European Union and NATO.

A referendum was held on May 21, 2006 in which the people of Montenegro voted by a slender majority in favour of Montenegrin independence from Serbia.

In recent years, Montenegro's economy has continued to transform into a more service-based one, with the proclaimed goal of becoming the elite tourist destination, and joining the European Union. Efforts have been made to attract the foreign investors into tourism greenfield investments, as well as in large infrastructure projects, both needed to facilitate the tourism developement.

Notes

ee also

*History of Montenegro
*Economy of Serbia and Montenegro
*Economy of Europe

External links

* [http://www.njegoskij.org/menu_today/menu_countryProfile.php The Njegoskij Fund Public Project >> Country Profile on Montenegro]
* [https://www.cia.gov/library/publications/the-world-factbook/geos/mj.html CIA World Factbook - Montenegro]