THE TWO MONTENEGROS

UNCLAS SECTION 01 OF 04 PODGORICA 000159

SENSITIVE
SIPDIS

DEPARTMENT FOR EUR/SCE AND EUR/ACE

E.O. 12958: N/A
TAGS: PGOV PREL ECON EAID EFIN KCRM MW
SUBJECT: THE TWO MONTENEGROS

PODGORICA 00000159 001.2 OF 004



1. (SBU) SUMMARY: The 11 municipalities that make up "northern
Montenegro" account for half of the country's territory and the
majority of its natural resources. However, they lag
significantly behind the coast and center of the country in
every leading economic indicator. The disparity between "north"
and "south" has potential consequences for social and political
stability, particularly as a majority of the north's 220,000
ethically diverse inhabitants voted against Montenegrin
independence in 2006 and have continued to support pro-Serb
opposition parties. The GoM and international donors have
belatedly recognized the need to improve conditions in the
north. We have launched a USD 10 million USAID program targeted
at stimulating private sector development in the North to help
strengthen stability in this sensitive region. END SUMMARY.



Northern Montenegro: Plenty of Potential...

--------------




2. (U) The 11 municipalities (Andrijevica, Berane, Bijelo Polje,
Kolasin, Mojkovac, Plav, Pljevlja, Pluzine, Rozaje, Savnik, and
Zabljak) that comprise "northern Montenegro" account for over
half the country's territory and roughly one-third of its
population. Bordering on Bosnia and Hercegovina, Serbia,
Kosovo, and Albania, they possess over two-thirds of
Montenegro's arable land, timber, lead, coal, and zinc reserves,
and hydro potential. The region also boasts spectacular
landscapes, cultural heritage sites, and excellent locations for
eco and adventure tourism. Before the breakup of the FRY,
several districts attracted visitors from around the region -
notably the mountain resorts of Kolasin and Zabljak, along with
the lake town of Plav. They are now a shadow of what they used
to be. In addition, the north has considerable potential for
niche agriculture production; for example, its natural (organic,
with the right certification) fruits, vegetables, and medicinal
herbs and teas, if packaged and marketed properly, could be
exported or sold to tourists eager for an "authentic"
Montenegrin experience.



...But Investment Goes South

--------------




3. (U) However, northern Montenegro, already historically poorer
than other parts of the country, has stagnated economically in
recent years, while the coast and Podgorica have enjoyed a
largely tourism-driven investment boom. The contrasts are
stark. For example, the north received only seven percent of
the country's foreign direct investment in 2008, the region's
officially reported unemployment rate of 15.3 percent was
significantly higher than that of the center (9.4 percent) and
coast (8.6 percent),and the north's poverty rate (14.9 percent)
also dwarfed that of the center and coast (6.5 and 6.8 percent
respectively). A just-released UNDP report said the
unemployment rate in the north is 17.8 percent, versus 2.2
percent on the coast.




4. (U) The northern municipalities also have the least developed
infrastructure and lag behind the rest of Montenegro in both
financial and human capital. A recent GoM survey found that
only 45 percent of northern residents know how to use a
computer, compared to about two-thirds of residents of the
center and coast. In addition, only 57 percent of northerners
live in areas with internet access (and only 25 percent reported
use of the internet),as opposed to 73 percent in central
municipalities and 85 percent along the coast. Development is
constrained by the region's geographic isolation from markets
and by a broad lack of understanding of market opportunities.



A Litany of Complaints

--------------


PODGORICA 00000159 002.2 OF 004





5. (SBU) Whether in Plav, Pluzine, or Pljevlja, we invariably
hear the same litany of complaints during our trips to the
north:



-- Infrastructure: Residents cite infrastructure improvements
-from roads to public transport to schools to medical services -
as essential for northern development. Improved roads top
everyone's lists, but we also hear how the lack of waste and
waste-water plants means that waste sometimes is dumped directly
into the region's pristine lakes and rivers.



-- Investment: Our interlocutors frequently complain that the
coast and capital get the lion's share of the Montenegro's
investment. For example, the 2008 budget for coastal tourism
hub of Budva (population 15,000) was 46.5 million euros, while
the budget for all 11 northern municipalities combined (with
222,000 inhabitants) was only 54.7 million euros. As the Mayor
of Mojkovac told us, funds for individual municipal budgets (and
by extension for coastal investments) came from the national
budget, meaning, he said, that the north was "severely
neglected."



-- Job Loss: Factory closures following the breakup of the FRY
hit the north especially hard, and have contributed greatly to
the lack of employment options in the region and consequent
outflow of young adults to the south and overseas. Remaining
residents have turned to small-scale and subsistence
agriculture, some small timber production, and small tourist
ventures.



-- Emigration: While the GoM has no firm statistics, GoM and
local contacts tell us that there has been significant
emigration to Podgorica, the coast, Serbia, Western Europe, and
the U.S. Older citizens in particular point out that the
bustling towns of their youth are today shells of their former
selves. Emigration has depopulated the region of many of its
brightest and most energetic residents.



Potential Spillover Effects

--------------




6. (SBU) The north-south developmental gap also has potential
ramifications beyond economics:



-- Rule of Law: Our interlocutors contend that high
unemployment and economic deprivation has led some locals to
engage in illicit activities. The north's geography and
topography - coupled with undermanned, under equipped, and under
funded law enforcement authorities - make it an ideal venue for
smuggling, particularly of narcotics. For example, police
sources tell us that Rozaje and Plav are prime transit points
for narcotics and other contraband moving from Kosovo and
Albania along a "northern Montenegrin corridor" into Bosnia and
on to Western Europe. Montenegro's media contain a steady
stream of reports on drug-related seizures and arrests in Rozaje
Municipality (no doubt dwarfed by the volume of smuggling which
is not interdicted).



-- Ethnic Tension: In addition, the ethnic mix in the north
poses potential challenges. According to the 2003 census, Serbs
make up 37 percent of the north's residents, followed by
Bosniaks/Muslims 35 percent, and Montenegrins (20). While
Albanians comprise less than two percent of northerners, they
account for 26 percent of residents in Plav, nestled between
Kosovo and Albania. By contrast, Serbs comprise 27 percent of
the population of Montenegro's ten remaining municipalities,

PODGORICA 00000159 003.2 OF 004


while Bosniaks make up less than one percent and Muslims only
two percent of those municipalities. (In the country as a
whole, Montenegrins comprise 43 percent of the population,
followed by Serbs (31),Bosniaks (8),Muslims (5),Albanians
(5),and Croats (1).)



-- Montenegro has arguably done the best job in the region of
managing inter-ethnic relations, and there are at present few
signs of ethnic strife - in fact, residents of mixed towns like
Bijelo Polje proudly cite their municipalities' long tradition
of tolerance. Nevertheless, opinion polls consistently show
Serbs - the majority of whom reside in the north -- to be
strongly negative toward the current DPS-led government. Ties
to Serbia also are reinforced by the fact that the GoS grants
Montenegrins Serbian citizenship upon request, and many
Montenegrins, especially from the north, work and study in
Serbia. (Note: It is important to understand that the ethnic
identity of many Orthodox Montenegrin citizens is fungible. An
Orthodox Slav who supports Montenegrin statehood might identify
himself as a "Montenegrin," while his brother, who opposed
statehood, could call himself a Serb; "Montenegrin" and "Serb"
are as much political identities as they are ethnic identities.)




-- Serb-majority towns Andrijevica (72 percent against),
Pljevlja (64),Pluzine (76),and Zabljak (61) opposed
independence, as did other northern towns of Berane (53),Savnik
(57),Kolasin (58),and Mojkovac (56). Among the 11 northern
municipalities, only Bosniak/Muslim-majority Rozaje (91 percent
in favor) and Plav (79 percent),and Bijelo Polje, where
Bosniaks/Muslims and Montenegrins form a combined majority,
supported Montenegrin statehood.



-- Serbs, particularly in the north (and in Serb-majority Herceg
Novi, on the coast) also have continued to vote for "Serb"
opposition candidates and parties. In the April 2008
presidential elections, President Vujanovic turned in his worst
totals (with the exception of coastal, Serb-majority Herceg
Novi) in Andrijevica, Kolasin, Mojkovac, Pluzine, Pljevlja, and
Zabljak. Opposition candidates Andrija Mandic (Montenegro's
leading Serb nationalist, now with New Serbian Democracy - NOVA)
and Srdjan Milic (who heads the civic, but heavily Serb,
Socialist People's Party - SNP) did well in the north (while
Mandic matched his overall national total of 19.5 percent, Milic
got 14.3 percent versus 11.9 nationwide). Their parties did
better than average in the region during the March 2009
parliamentary elections (SNP received 19.7 percent of the vote
in the 11 northern municipalities, versus 16.5 percent
nationwide, and NOVA received 10.1 percent in the north versus
9.1 nationwide).



--While both Mandic and Milic opposed independence, it is
important to note that both (and particularly Milic) accept
Montenegrin statehood. In addition, this year's parliamentary
election represented a step in the direction of moderation as
Milic's more centrist party made gains, and Mandic's split with
more radical elements (two small radical Serb splinter parties
got only about 1,500 votes in northern municipalities.) That
said, Mandic's party in particular still contains many strong
advocates of reunification with Serbia, and as late as October
2007 (after the passage of Montenegro's Constitution),Mandic
himself called on his supporters to boycott state institutions
and reject state symbols. And this April, both parties
boycotted the playing of the national hymn at the opening
session of the new Parliament.



-- Although Serbs are by far the largest source of antipathy
towards the current government, Montenegro reportedly has a few
hundred "Wahabbis," concentrated in Rozaje and Plav. (More on
the Wahabbi issue to be reported septel). In the 1990s, a
handful of Montenegrin Muslims flirted with the notion of
autonomy for Montenegro/Serbia's Muslim Sandzak region. Thus
far, neither of these currents has been a major factor on the
national political scene.


PODGORICA 00000159 004.2 OF 004




GoM Taking Notice (Finally)

--------------




7. (SBU) Until recently, almost all GoM-funded northern
development projects in the north were small. But the GoM has
belatedly recognized the importance of improving economic
conditions in the north, and officials have told us they intend
to focus increasingly on the neglected northern municipalities.
In fact, the GoM's flagship infrastructure project - the highway
from Bar to the Serbian border - is often cited as a cure-all
for the north's ills. However, the project will take more than
five years to complete once construction begins. On the other
hand, another road from Risan on Kotor Bay to Zabljak is now
partially complete and should be finished entirely by the end of
2009/early 2010. It will link coastal transit areas with UNESCO
heritage site Durmitor National Park, which straddles Pluzine
and Zabljak municipalities.




8. (SBU) In September 2008, the GoM launched the "Posao za Vas"
("A Job for You") initiative to promote employment and
entrepreneurship by providing concessionary credits to small
northern businesses. PM Djukanovic recently announced that the
program will be expanded with 18.15 million euros allocated for

2009. To date, the GoM has received about 500 applications,
which could create roughly 2,000 new workplaces. However,
opposition parties and some local representatives charge that
only "selected" candidates with demonstrated allegiance to the
ruling coalition have received benefits under this program.




9. (U) The GoM also reportedly plans to launch two other
significant projects in the north: the development of a
comprehensive tourism plan for the Bjelasica and Komovi mountain
region, and a tender for the construction of four large hydro
plants on the Moraca River. Tenders for a number of smaller
hydro projects also have been initiated. In September 2008, the
GoM also launched a 4.5 million euro initiative to develop the
Bukovica region in the far north, which saw incidents of "ethnic
cleansing" of Bosniaks and Muslims in 1992. The funds will go
toward developing roads and housing to facilitate refugee
returns.



Comment

--------------




10. (SBU) Bridging the north-south develop gap and creating more
balanced prosperity throughout the country is a key mission
priority. In fact, our largest assistance program in
Montenegro, "Stimulating Economic Development of the North"
(STARS),targets entrepreneurs, especially in the agriculture
and tourism sectors. It also aims to strengthen links between
northern businesses and markets in the rest of Montenegro, as
well as neighboring countries. Also, we believe that our own
attention to the region will serve as a catalyst for greater
involvement by the GoM and international donors, as well as
foreign investors, bolstering long term stability in the entire
area.
MOORE