Municipalities in Montenegro face significant challenges in terms of financial sustainability, the digitalisation of public services, and balanced regional development. Although the legal framework provides mechanisms to safeguard local revenues, these are often not implemented in practice, while additional responsibilities and costs are transferred from the central government without corresponding financial support, says Mišela Manojlović, Secretary General of the Union of Municipalities of Montenegro, in an interview with the Bankar portal. Manojlović highlights that the Union of Municipalities is actively working to strengthen the capacities of local governments by supporting project preparation and facilitating access to EU funding and national support mechanisms. Asked about the Union's position on major foreign investors, such as Mohamed Alabbar, given that municipalities have expressed differing views, Manojlović explained that the Union does not take positions on individual investment projects. Instead, it advocates for municipalities to have a meaningful voice in decision-making on projects that directly affect their communities.
What are the key challenges municipalities face in terms of financial sustainability and budget planning?
While some municipalities are financially more stable, less developed municipalities that rely on the Equalisation Fund face significant challenges in maintaining financial sustainability. The greatest impact on local finances has come from legislation governing local self-government, municipal financing, spatial planning, the coastal zone, and the tax system, as well as other laws that have either reduced municipal revenues or increased expenditures, such as the Law on Forests. Although the Law on Budget and Fiscal Responsibility provides that municipalities are entitled to adequate alternative sources of revenue whenever draft legislation reduces or limits their income, this obligation is not consistently implemented in practice. Government efforts to offset revenue losses through a larger share of personal income tax and additional grants have proved insufficient, particularly for less developed municipalities. Furthermore, the Law on Property Tax and the Law on Tax Administration have enabled certain law firms to develop a business model based on filing standardised appeals against property tax decisions, imposing a substantial financial burden on municipal budgets—not only in financially stronger municipalities but also in the smallest ones. Municipalities are also not entitled to reschedule their own tax liabilities, placing them at a disadvantage compared to other taxpayers and exposing them to the risk of bank account freezes. In addition, the central government frequently transfers new responsibilities without providing the necessary financial resources for their implementation, while further costs arise from legislation that allows the abuse of the right of access to public information, placing additional administrative and financial burdens on local authorities.
How far has the digitalisation of local public services progressed, and which municipalities are leading this process?
Many municipalities still face challenges in providing basic digital public services, such as online tax payments, the electronic issuance of documents, and the online submission of applications. The lack of interoperability between central and local government registers further slows administrative processes and makes it more difficult to deliver efficient services to citizens. The Union of Municipalities, in cooperation with the Capital City and the relevant ministries, is actively working to address these challenges and improve the availability, quality, and efficiency of digital public services across municipalities.
How does the Union of Municipalities cooperate with state institutions in the planning and implementation of capital investment projects at the local level?
According to our member municipalities, financing through the State Capital Budget is not adequately regulated and lacks clear criteria for selecting local infrastructure projects. Municipalities are required to submit their project proposals to the Ministry of Finance by 15 March of the current year. The Ministry then prepares a list of proposed projects and submits it to the Project Evaluation Commission by 1 May for consideration for inclusion in the State Capital Budget for the following fiscal year. In practice, municipalities only learn which projects have been selected for state funding after the list of priority capital projects—or even the draft State Budget Law—has already been prepared. By that stage, there is little opportunity for municipalities to respond or address any deficiencies. For this reason, the Union of Municipalities has submitted an initiative to amend the Decision on the State Capital Budget, proposing that municipal representatives be allowed to participate in the meetings of the Project Evaluation Commission. This would enable municipalities to respond within a reasonable timeframe and ensure that priority local projects meet the required funding criteria. A positive example of cooperation was established following the adoption of the Law on Local Government Finance in 2019. At the initiative of the Union of Municipalities, a Municipal Project Pre-financing Support Fund was created, operating on a revolving fund model. The Fund provides municipalities with loans to pre-finance projects supported by international donors until grant reimbursements are received. By the end of last year, municipalities had drawn approximately €3.7 million from the Fund, while €1.5 million has been allocated for the current year, providing valuable support for the implementation of donor-funded projects. In addition, this year the Union of Municipalities continues to finance the preparation of project documentation from its own resources, with approximately €700,000 allocated for that purpose, helping municipalities prepare high-quality projects and improve their access to external funding opportunities.
Is there a strategy for achieving more balanced regional development, and how does it affect less developed municipalities, particularly those in the northern part of Montenegro?
We are all aware that this issue has burdened Montenegro for decades. It is indeed a paradox that the country's resource-rich northern region remains insufficiently developed, both in terms of harnessing its natural potential and developing the necessary infrastructure. This situation has been driven primarily by centralised decision-making and short-term political interests. Municipalities need innovative development ideas and sustained support to make better use of their own resources, many of which hold considerable untapped potential. In 2024, the Union of Municipalities of Montenegro prepared the terms of reference for a feasibility study aimed at integrating health tourism—particularly complementary (alternative) therapies—with other forms of tourism, organic agriculture, environmental protection, and healthy lifestyles across all municipalities in Montenegro, especially in their rural hinterlands and in other areas with natural potential for preventive healthcare and medical treatment. Combined with greater absorption of donor funding and stronger local revenue generation, this initiative could steer local development towards branding all municipalities as BioEco destinations, help reverse the trend of depopulation, and transform the traditional tourist season into year-round tourism. Such an approach would also create new, sustainable employment opportunities outside the local government sector, contributing to long-term economic and regional development.
To what extent do municipalities make use of EU funds and other international funding sources, and does the Union of Municipalities provide support in project preparation and the development of funding applications?
As a country in the EU accession process, Montenegro has access to a range of pre-accession and international funding instruments, including the Instrument for Pre-accession Assistance (IPA and IPARD) and the International Fund for Agricultural Development (IFAD). In addition, municipalities may apply for funding through Interreg and Cross-Border Cooperation (CBC) programmes, the European Regional Development Fund (ERDF), the EUROMED Programme, the EUKI – European Climate Initiative, the Instrument contributing to Stability and Peace (IcSP), Norwegian Grants, and various bilateral cooperation programmes. During the first two IPA programming periods, Montenegrin municipalities participated in more than 167 projects, with a combined value of approximately €124 million. However, successfully accessing these funds requires municipalities to meet a number of prerequisites, including resolved property ownership issues, prepared tender documentation, strategic planning documents, and sufficient resources for project pre-financing. Many municipalities also face limited administrative capacity, with only a small number of staff responsible for donor-funded projects, leading to heavy workloads, limited specialisation, and fewer opportunities for professional development in project management. One important obstacle has been addressed through the Municipal Project Pre-financing Support Fund, established at the initiative of the Union of Municipalities of Montenegro. As previously mentioned, the Fund helps municipalities secure the upfront financing needed to implement donor-funded projects, significantly improving their ability to absorb available international funding.
The Union of Municipalities of Montenegro provides comprehensive support to municipalities in accessing international funding through a range of capacity-building and technical assistance measures. These include the preparation of the Practical Guide to Project Proposal Writing for Local Governments in South-East Europe, the organisation of training programmes for local government officials and civil servants, and the provision of on-the-job mentoring to assist municipalities in preparing specific project applications upon request. The Union has also established a Network of Municipal Project Managers, bringing together local officials responsible for donor-funded projects to facilitate the exchange of knowledge, experience, and good practices. Since 2024, the Union has further strengthened its support by creating a Network of External Experts with extensive experience in EU and international project management. This network is made available to municipalities through the Union to assist with project preparation, application development, and the implementation of approved projects, thereby enhancing municipalities' capacity to successfully absorb international funding.
What are the largest infrastructure and investment projects currently being implemented in Montenegro's municipalities? Which municipality is leading in infrastructure development, and which is lagging behind? Do local governments have sufficient capacity to attract and manage foreign direct investment?
One of the largest infrastructure projects currently being implemented at the local level is the wastewater treatment plant in Podgorica, which is only natural given that it is the largest city in the country. At the same time, all municipalities are investing in the improvement of local infrastructure in order to enhance the quality of life of their citizens, prepare for future investment opportunities, and strengthen their competitiveness. We know that there can be no investment without adequate spatial planning documentation. A positive development is that municipalities have regained responsibility for spatial planning, which will enable them to prepare projects more efficiently and create more favourable conditions for attracting investors. Furthermore, at the initiative of the Union of Municipalities of Montenegro, the new Law on Spatial Planning provides for the establishment of joint planning agencies, allowing municipalities to pool expertise and resources. This solution is expected to be particularly beneficial for smaller municipalities, helping them strengthen their planning capacities and improve their ability to attract and implement investment projects.
What is the position of the Union of Municipalities of Montenegro on major foreign investors such as Mohamed Alabbar, given that municipalities have expressed differing views, ranging from strong support to open reservations?
The Union of Municipalities of Montenegro does not take a position on individual investors or specific investment projects. Its role is to support municipalities in matters of common interest, strengthen their institutional and administrative capacities, and facilitate effective communication and cooperation with state institutions.
How important is it to take municipalities' views into account when it comes to major investment projects, and how can the Union of Municipalities help balance local interests with investors' expectations?
It is essential that municipalities have a meaningful voice in decisions that directly affect their communities. The Union of Municipalities of Montenegro has signed cooperation agreements with both the Government and the Parliament of Montenegro and continues to advocate for strengthening this institutional cooperation. The Union's objective is to help establish a legislative and institutional framework that enables municipalities to plan and manage their development in accordance with local priorities and the needs of their citizens, while ensuring that major investment projects are implemented through a transparent, inclusive, and cooperative decision-making process that balances local interests with broader development objectives.
(Source: Bankar)
