Regional Policy and Decentralization in Montenegro

Abstract

Although Montenegro enjoyed rapid economic growth in the period preceding the onset of the global economic crisis, the process of economic transformation that took place over the previous decade led to severe deindustrialization of the less developed North East region of the country. In this region, most of the local wood-processing factories closed down in the early 2000s, leading to the paradox of widespread unemployment and abandoned factories amid an area of abundant forest resources. International aid projects funded by the EU and bilateral donors have sought to revive the prospects of the region but with little success. The region benefitted little from the pre-crisis economic boom that took place from 2004 to 2008, which was mainly based on a large inflow of foreign direct investment (FDI) to the Coastal region. The North East region has failed to attract new foreign investment in green field development, and has remained underdeveloped with poor infrastructure and regional disparities within the country having widened.¹