Improving public sector governance is vital for Montenegro's EU membership

Montenegro gained independence from Serbia and Montenegro in 2006 and became a candidate European Union (EU) member state in 2010.

In April of this year the EU-Montenegro Joint Consultative Committee (JCC) sent a clear message to the 27 EU members that Montenegro, a regional EU accession frontrunner, is firmly committed to becoming the 28^th EU member state by 2028. To be admitted, the country needs to advance rapidly on several reform areas, to close 33 open “chapters” (out of 35 total) of the EU Acquis, each representing a specific policy reform area. One of the key reform areas that remains open relates to governance and capacities of public institutions, which also affects progress on other sectors like environment, climate change, human development, innovation, and competition.

World Bank’s BEST Program: Accelerating 4 priority reforms

Improving public sector governance is a crucial part of the World Bank’s partnership with the EU on supporting a range of development initiatives in Montenegro. One key initiative is the Building an Effective, Sustainable, and Transformational (BEST) Public Sector (EUR 3.5 million) Technical Assistance program launched in February 2024, financed by the European Delegation to Montenegro. The program focuses on accelerating reforms to improve the effectiveness of Montenegro’s public sector and institutional capacities, a vital reform area for EU accession and a key pillar for the country’s development. BEST supports four priority areas:

1. Strengthening the governance of state-owned enterprises (SOEs) - SOEs play a significant role in Montenegro's economy; however, their financial performance and delivery of essential services are often hampered by governance weaknesses. The government recognizes that SOE reforms are vital to the sector’s performance and contribution to the economy and reducing their negative impacts on the budget and business environment. The World Bank is supporting these reforms by providing actionable analytics, and technical assistance on critical legal, policy, institutional reforms, including strengthening the state ownership and oversight function and accountability.
2. Strengthening institutions and governance in key sectors - Persistent institutional and governance weaknesses are drivers of low government effectiveness and service delivery in Montenegro. This is why it is important to strengthen capacities and governance in key sectors such as environment, energy, and innovation and health. All are priority sectors for the government given their commitment to green growth, combatting climate change, enabling innovation-driven economic development, and improved health care – and they are key areas of BEST support. The Bank’s support through BEST is expected to advance the government’s efforts on critical chapters of the EU Acquis, namely Chapter 27 on environment & climate, Chapter 25 on science and research, and public administration reform fundamentals.
3. Improving revenue collection - Critical reforms are needed to improve revenue collection by modernizing and building capacity of the Montenegro Tax Administration to enhance the efficiency and quality of operations. While the World Bank team has delivered extensive support on revenue administration reforms through an ongoing investment operation, the BEST program is providing complementary analytics and technical assistance to strengthen the Tax Administration’s institutional capacities, including in the areas of human resources and skills, and information exchange systems for the Value added tax (VAT), in line with Chapter 16 of the EU Acquis.
4. Accelerating government modernization and use of technology - Despite significant efforts to advance public sector use of technology and online services over the past 10-15 years, progress has been slow. The BEST program supports several immediate priorities such as improving user-experience, digital user interfaces, and verifiable digital credentials.  It also supports the development of plans towards the country’s first artificial intelligence strategy and strengthening digital skills.

The efforts to strengthen governance and institutions across sectors, SOEs, tax administration, and technology for service delivery offer a concrete path for Montenegro to advance key reforms required for EU accession and other strategic commitments. If they succeed, they will be foundational to bringing Montenegro’s economy and living standards for ordinary Montenegrins closer to their European neighbors.

Photo: BEST Launch event, Podgorica, February 28, 2024

Editor’s note: The EU-World Bank partnership for BEST is administered under the Governance and Institutions Umbrella Program (G&I UP), a multi-donor platform designed to support World Bank client countries to build capable, efficient, open, inclusive, and accountable institutions and improve public sector performance and institutional reform, increase application of digital and technology solutions in the public sector, and enhance transparency and accountability.