SOCIAL PROTECTION AND SOCIAL INCLUSION IN MONTENEGRO

European Commission Directorate-General for Employment, Social Affairs and Equal Opportunities Unit E2 Manuscript completed in June 2008

European Commission

This report was financed by and prepared for the use of the European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities. It does not necessarily represent the Commission's official position.

http://ec.europa.eu/employment_social/spsi

Contractor Institute for Strategic Studies and Prognoses

www.isspm.org Authors Jadranka Kaludjerovic Danilo Sukovic Ana Krsmanovic Milica Vukotic Vojin Golubovic Ivana Vojinovic

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© European Communities, 2008 Reproduction is authorised provided the source is acknowledged.

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Table of Contents Acronyms cited in the Text................................................................................................. 5 1. Chapter 1. Economic, Financial and Demographic Background ............................... 8 1.1. Main Factors Influencing Social Protection ............................................... 8 1.1.1. Economic and Financial Indicators ........................................................ 8 1.1.2. Main Demographical Trends ................................................................ 13 1.2. Forecasts and Projections ......................................................................... 15 1.2.1. Economic Forecasts .............................................................................. 15 1.2.2. Demographic and Labour Force Forecasts ........................................... 16 1.3. Influence of Economic Social and Demographic Trends on Social Protection.............................................................................................................. 16 1.4. References for the Chapter 1 .................................................................... 18 1.5. Statistical Annex for the Chapter 1........................................................... 20 2. Chapter 2. Social Protection and the Social Welfare System................................... 26 2.1. Current Structure ...................................................................................... 26 2.1.1. Overview of the Social Protection System ........................................... 26 2.2. Social Protection Financial Benefits and Allowances .............................. 28 2.2.1. Contributory Benefits ........................................................................... 28 2.2.1.1. Unemployment Benefits ................................................................... 28 2.2.1.2. Maternity Leave................................................................................ 29 2.2.1.3. Sickness Benefit................................................................................ 29 2.2.2. Social Assistance Benefit ..................................................................... 30 2.2.2.1. Family/Individuals Assistance Benefits ........................................... 30 2.2.2.2. Child Protection Benefits.................................................................. 32 2.2.3. Veterans and Disability Protection ....................................................... 34 2.2.4. Other Social Benefits............................................................................ 34 2.3. Provision of Social Services ..................................................................... 35 2.3.1. Preventive Services............................................................................... 36 2.3.2. Institutional Care .................................................................................. 36 2.3.3. Non- Institutional Care ......................................................................... 38 2.4. Financing Social Protection in Montenegro ............................................. 38 2.5. Implemented and Planned Reforms.......................................................... 39 2.6. Key Challenges of the SP System in Montenegro.................................... 41 2.7. References for the Chapter 2 .................................................................... 42 2.8. Statistical Annex for the Chapter 2........................................................... 44 Table 2.5: Number of personal disability benefit users (December)........................ 46 3. Chapter 3. Poverty and Social Exclusion ................................................................. 51 3.1. National Definition of Poverty ................................................................. 51 3.2. Poverty Data and Profile........................................................................... 53 3.3. Poverty Indicators and Laeken Indicators of Social Exclusion ................ 56 3.4. Vulnerable Groups.................................................................................... 56 3.5. Conclusion ................................................................................................ 62 3.6. References for the Chapter 3 .................................................................... 63 3.7. Annex for the Chapter 3 ........................................................................... 65 3.7.1. Research on Poverty ............................................................................. 65

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3.7.2. Statistical annex .................................................................................... 67 Chapter 4: The Pension System................................................................................ 73 4.1. Organization of the Pension System......................................................... 73 4.1.1. Pension Reform .................................................................................... 73 4.1.2. Institutions .............................................................................................................. 76 4.2. Benefits ..................................................................................................... 79 4.3. Financing of the Pension System.............................................................. 81 4.4. System Coverage ...................................................................................... 82 4.5. Sustainability of the Current Pension System .......................................... 83 4.6. Adequacy of the Future Pension System .................................................. 84 4.7. Political and Policy Direction of Future Reform...................................... 88 4.8. Main Challenges of Current and Future Pension System in Montenegro 89 4.9. Conclusions .............................................................................................. 91 4.10. References for the Chapter 4 ................................................................ 92 4.11. Statistical Annex for the Chapter 4....................................................... 93 5. Chapter 5. The Health Care System and Long-Term Care....................................... 99 5.1. Current Structures..................................................................................... 99 5.1.1. Health Profile........................................................................................ 99 5.1.1.1. Health Indicators............................................................................. 100 5.1.1.2. Factors that influence health status................................................. 101 5.1.1.3. Accessibility of the Healthcare system........................................... 104 5.1.1.4. Accessibility of health care to RAE and IDP ................................. 107 5.1.2. Organization of the Health Care System ............................................ 109 5.1.2.1. Public Health Infrastructure............................................................ 109 5.1.2.2. Financing of the Health Care System ............................................. 111 5.1.2.3. Health protection benefits............................................................... 112 5.1.2.4. Health use ....................................................................................... 114 5.1.2.5. Coverage of the healthcare system and sustainability .................... 115 5.1.3. Long-Term Care in Montenegro......................................................... 117 5.2. Reforms of Health Care and Long-Term-Care System .......................... 119 4.

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5.2.1. Public awareness and acceptance ....................................................... 119 5.2.1.1. The position of the state on the health care market and further action for the improvement of the quality of the healthcare system ............................. 120 5.3. Conclusion and Challenges .................................................................... 122 5.5.1. Monitoring of Health System Reform .......................................................... 127 5.4. References for the Chapter 5 .................................................................. 129 5.5. Statistical Annex for Chapter 5............................................................... 131 Chapter 6. Conclusions and Future Challenges...................................................... 142 6.1. Conclusions ............................................................................................ 142 6.2.

Challenges Ahead ................................................................................... 143

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Acronyms cited in the Text AIDS -

Acquired immune deficiency syndrome

APSE -

Alleviation of Poverty and Social Exclusion

CEB -

Council of Europe Bank

CPI -

Consumer Price Index

CSW -

Centre for Social Work

DG ECFIN

Directorate General for Economic and Finance

DM -

Douche Mark

EAM -

Employment Agency of Montenegro

EFP -

Economic and Fiscal Program

ESSPROS

European System of integrated Social Protection Statistics

ETF –

European Training Foundation

EU –

European Union

FDI -

Foreign Direct Investment

FRY –

Federal Republic of Yugoslavia

GDP -

Gross Domestic Product

GoM –

Government of Montenegro

HBS –

Household budget survey

HF –

Health Fund

HHS –

Household survey

HIF -

Health Insurance Fund

HIV -

Human Immunodeficiency Virus

IBRD -

International Bank for Reconstruction and Development

ID –

Identification card

IDA -

International Development Association

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IDP –

Internally displaced persons

ILO -

International Labour Organization

ISSP-

Institute for Strategic Studies and Prognoses

LFS –

Labour Force Survey

LSMS – Living Standard Measurement Survey LTC –

Long-term care

MHLSW -

Ministry of Health, Labour and Social Welfare

MICS –

Multiple Indicator Cluster Survey

MONSTAT

Statistical Office of Montenegro

MOP -

Family material support

NATO -

North Atlantic Treaty Organization

NGO –

Nongovernment organization

OCHA -

Office for the Coordination of Humanitarian Affairs

OECD –

Organization for Economic Cooperation and development

OSCE –

Organization for Security and Co-operation in Europe

PAYG -

Pay- as-you-go

PHC -

Population and Housing Census

PIO Fund -

Pension and Disability Fund

PPP -

Purchasing Power Parity

PRSP-

Poverty Reduction Strategy Paper

PU –

Public Institution

RAE-

Roma, Ashkelia and Egyptians

SCMN-

Securities Commission of Montenegro

SFRY-

Socialist Federal Republic of Yugoslavia

SME-

Small and Medium Enterprises

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SSW –

Service for Social Work

TB –

Tuberculoses

UN –

United Nations

UNDP-

United Nations and Development Program

UNECE –

United Nation Economic Commission for Europe

UNESA –

United Nations Economic and Social Development

UNHCR-

United Nations High Commissioner for refuges

UNICEF-

The United Nations Children’s Fund

USAID-

United State Agency for International Development

VAT-

Value Add Tax

WHO-

World Health Organization

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1.

Chapter 1. Economic, Financial and Demographic Background

1.1. 1.1.1.

Main Factors Influencing Social Protection Economic and Financial Indicators

In the SFRY, Montenegro was considered to be one of the least developed republics. It had a relatively inactive population and was dependent on heavy industry, which made up roughly 40% of the GDP and 40% of overall employment. Similar to other former SFRY Republics, the most successful year in the pre-dissolution period was 1989. The beginning of the transition process in the early 1990s and the subsequent dissolution of the Socialistic Federal Republic of Yugoslavia and armed conflicts in neighbouring countries, have contributed to a serious slowdown in the economic activity in Montenegro. Moreover, due to the poor monetary policy of the Federal Republic of Yugoslavia (a state created from Serbia and Montenegro after the SFRY’s dissolution), the slowdown in economic activity was followed by hyperinflation, culminating in 1993 when the GDP in Montenegro was reduced to almost half of its pre-transitional level (see Figure 1.1). Besides these internal factors, the United Nations imposed sanctions on the FRY in the period from 1991 to 1995, which had a negative impact on economic growth and hindered any possible recovery. In 1994 an anti-inflation program was implemented and the economy started to recover slowly, which was evidenced by high rates of growth in the real GDP. Despite reform in the monetary policy, Montenegro again experienced high inflation due to extensive government spending, by both the national and federal governments. In addition to this, a political crisis and dispute between Montenegrin and Serbian authorities culminated in 1997, when the Montenegrin government distanced itself from the politics of the Serbian and FRY governments, and began to implement independent economic reforms. In the 1999 Kosovo crisis, a large inflow of refugees from Kosovo, the deterioration of economic activity, and rising inflation prompted the Montenegrin authorities to introduce the Deutsche Mark as legal tender in Montenegro. In 2006 Montenegro voted for independence at the referendum, and in June 2006, became an independent state. There has been real growth in the GDP since 2000, thanks to the increased production of both goods and services. Generally speaking, during the period from 2000 the 2005, the largest contribution to GDP growth has come from agriculture (about 0.4 % per year), trade (0.7%) and from the hotel and restaurant industry. GDP growth was slowed down by real estate and by renting and business activities (including imputed rents) which decreased the growth of the gross value by 1%. The GDP grew faster as a result of net taxes on production, which on average contributed 2.6% to the growth of the GDP. These developments reflected the increase in tariffs on the growing number of imports, the introduction of VAT in 2003 and the reduction of state subsidies for businesses. Manufacturing became a significant contributor to the GDP after 2003 (0.6 % per year), whilst the share of services in the GDP fluctuated.

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The post independence period was marked by strong economic growth evidenced through high real GDP growth rates, a high inflow of FDI and the strong growth of services sectors, especially the tourism and real estate sectors. In 2006 and 2007, GDP growth reached 8.6% and 7%, respectively1. However, despite strong GDP growth, especially over the last two years, the GDP level from 1989 has not yet been achieved (Figure 1.2). As was expected from the transition period, after fifteen years, not only did economic activity change, but so did the structure of the economy. The share of heavy industry declined, whilst the share of services increased. Production statistics from the early 1990’s show the industrial production share as approximately 40% of the GDP. Latest available statistics on the structure of the GDP show that industrial production now makes up only 13.8%2 of the GDP. According to MONSTAT3 data for 2006, the GDP grew by 8.6% in real terms, mainly due to the growth of the service industry sector. The inflation rate fell to under 10% in 2002 as a result of monetary and fiscal reforms, particularly the introduction of the DM in 1999. From November 1999 to December 2002, inflation (CPI) in Montenegro fluctuated due to the introduction of a new currency, price liberalization, a new tax system (VAT introduction) and increase in customs (due to harmonization with Serbia). Following these shocks, inflation fell to 2.8% in 2006, nearly reaching the euro-zone level. In 2007, inflation increased compared with the previous year as a result of increased food, electricity and oil prices. The average annual change in the CPI index in 2007 was 4.3% (see Figure 1.3). Retail prices experienced similar dynamics as the CPI. Overall public expenditure (the central budget, state funds and public companies) made up more than 40% of Montenegro’s GDP in 2006, which was a decrease of more than 10% compared with the year 2000. Central budget expenditures made up 33.5% of the GDP in 2007. But the most important fact related to the fiscal situation was the 2006 budget surplus of 1.6%, which further increased to 6.9% of the GDP in 2007 (Figure 1.4). Fiscal stabilization was also achieved through the strong management of fiscal expenditures, making them constant in real terms. Whilst overall tax reforms made tax rates lower, a wider tax base kept fiscal revenues stable and adequate for financing necessary expenditures. In the external sphere, trade deficit increased constantly due to growth in new investment and domestic consumption. At the same time the capital and financial surplus increased as well, primarily due to the increased inflow of the FDI and because of portfolio investment in the capital market. The current account deficit as a percentage of the GDP in 2006 increased significantly from 8.9% in 2005 to 26% in 2006, whilst in 2007 it reached 29.4% of the GDP according to DG ECFIN.4 This was because expenditure grew faster than revenue from imports of goods and services. Namely, the goods trade deficit, one of the main contributors to the external economic disequilibria, increased in 2006, 1 2 3 4

DG ECFIN, Spring forecasts MONSTAT – Gross Domestic Product of Montenegro in 2006”, March 2008 MONSTAT – Gross Domestic Product of Montenegro in 2006”, March 2008 DG ECFIN “Candidate and Pre-accession Countries’ Economies Quarterly”, April 2008

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both in absolute terms, and as a percentage of the GDP. Exports as a share of the GDP were recorded to have constantly increased during the period from 2000 to 2006, from 36.8% to 49.4%, whilst imports as share of the GDP ratio increased from 51.1% in 2000 to 79.1% in 2006. Average wages in Montenegro recorded high nominal growth rates from the beginning of the transition period. However, real growth rates were negative during the period from 1991 to 1995 due to hyperinflation. Since 1996, average wages have had, in real terms, high real growth rates, although they were much lower compared to nominal growth rates (Figure 1.5). During the period from 1996 to 2004, a high increase in wages was partly caused by inflation pressures as well as by constant increases in the minimum wage5. However, during the period from July 2002 to January 2007, the minimum wage remained at 50€ per month, so there was no impact on the average wage, whilst, on the other hand, inflation stabilized at a one digit level, implying that the increased productivity of the workforce was the main cause for wage growth. Average annual real net wage growth during the period from 1996 to 2006 was 8.8%, whilst real wage growth in 2007 reached 15%. During the first quarter of 2008, the average net wage in Montenegro was €393, and €5766 in gross terms (which includes both the net wage and the employee share of contributions), and increased by approximately 8% in real terms in comparison with the same period in 2007. Following the start of the transition process and the war, the situation in the Montenegrin labour market also changed significantly. Prior to the transition process, unemployment in Montenegro was relatively high, whilst the activity rate of the population was low. According to the 1991 census 51.6% (Figure 1.6) of the Montenegrin population aged between 15 and 64 years of age was active. The unemployment rate was 20.5%, whilst the employment rate remained at 40.1%. During the period after 1991, due to a significant fall in economic activity, unemployment has increased. Nevertheless,, the growth in unemployment was not sharp enough to cause a decline in economic activity, due to the high level of employment protection. Moreover, employment in the informal sector, tolerated by authorities, compensated for job losses in public sector companies. Additionally, the growing private sector generated new jobs, although the pace of job creation in the private sector was not as fast as job destruction in the public sector. The Montenegro’s labour market in 2007 was characterized with relatively low activity rates, less than 60%, and relatively high unemployment rates. The activity rate among the population aged between 15 and 65 was below 60% in 2007 (59.2%), according to the survey carried out by ISSP/Employment Agency of Montenegro Labour Force. In a tenyear period, the economic activity of the Montenegrin population increased by 3% from 56% in 1997. The activity rate was higher amongst the male population as 62.1% of the male population is active. This has remained more or less constant since 1999. The 5

The minimum wage has important influence on the average wage, as all wages in the economy, and especially in the public sector, are linked to this wage. According to the Montenegrin minimum wage concept, there is basic cost for labour (national minimum wage), which is the cost of unqualified labour, whilst the General Collective Agreement sets a wage coefficient for all levels of education (10 levels). So, for example, currently the minimum wage for unqualified worker is 55€ per month, whilst the minimum wage for a person with university education is 181.5€ per month. 6 MONSTAT, Monthly Statistical Review, No.4, 2008

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activity rate of females, on the other hand, was 49.2% in 1997, an increase of 4% from 1999. LFS 2007 showed that the lowest activity rate was amongst the population aged between 15 and 19 (13.6%) and amongst the population aged between 60 and 64 (27.5%). The highest activity rate was among the population aged 35 to 39 years with 77.5% (Table 1.2 ). With regard to educational attainment (2007 LFS7), activity rate is higher among the population with university education (68.2%), than amongst the population with only secondary level education (57.6%). The lowest is among those with primary or less than primary level education (24.3%). The service sector dominates in the largest share of employment, and continues to increase over time. Employment in the service sector was 71.8% of the total in 1999 and increased to 76.5% in 2007. The number of people employed in agriculture also increased from 6.9% in 1999 to 8.9% in 2007, whilst the number employed in heavy industry declined from 21.3% of overall employment to 14.6% of overall employment. Besides changes to employment by sector, the employment structure also changed through ownership. According to the ISSP household survey data, the share of those employed in the public sector amounted to 59.6% in 2001, but fell to 36.6% in 2007. On the other hand, the share of private sector employment increased from 34.8% in 2001 (same source) to 61.6% in 2007. Other types of ownership made up 5.6% and 1.8% respectively. The structure of employment through ownership changed partly because of the privatisation of state-owned companies, and also largely due to the creation of new jobs in the private sector. Data for the Employment Agency of Montenegro regarding the number of registered unemployed persons shows that registered unemployment in Montenegro reached its maximum level in 2000, when average registered unemployment was over 80,000. Since then, unemployment has fallen constantly. It was reduced by half in 2006. According to the same sources, the unemployment rate fell from over 30% in 2000 to 14.7% in 2006. In 2007 (DG ECFIN8) the average unemployment rate in Montenegro was 11.9%. Females make up 45.6% of the unemployed population. The level in 1999 was 64.4%. Also, the unemployment rate in the female labour force in 2007 was lower than the unemployment rate in the male labour force. In 1999, the unemployment rate among females was 27.5%, whilst the unemployment rate of males was 12.6%9. In 2007, the unemployment rate among females was 11.7%, whilst the unemployment rate among males was 13.5%. This difference between the rates of unemployment was partly caused by lower activity rates among females (49.1% among females and 62.1% among males). Apart from a relatively high rate, one of main characteristics of unemployment in Montenegro is its duration. The average length of unemployment is 3.7 years. According to 7 8 9

ISSP/Employment Agency of Montenegro, Labour Force Survey 2007 DG ECFIN “Candidate and Pre-accession Countries’ Economies Quarterly”, April 2008 Federal Statistical Office LFS 1999

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data from the Employment Agency of Montenegro in 2006 there were 22,616 or 58.2% (67.9% in 2003) unemployed persons who sought (is better than waited) for a job for over a year, whilst 11,238 or 28.91% of the unemployed looked for a job for more than three years. The labour market in Montenegro is still characterized by a high level of employment in informal economy. According to the ISSP/EAM LFS survey from 2007, in June 2007 almost 50,000, or 22.6% of employed persons, were in some way active in the shadow economy (subsistence economy, unregistered work in unregistered companies, and unregistered employees in registered companies). The subsistence economy engaged 18% of the total number of persons engaged in the informal economy, or 4.1% of the total employed. The remaining 18.5% of all employed persons were unregistered workers, both in unregistered and registered companies. On top of this, there were an additional 30,000 employees (17.5%) who only had one part of their salary registered. These statistics cast doubts on the quality of employment generated in Montenegro’s economy. There are large regional discrepancies in employment between regions. The highest unemployment rate was recorded in the north (17.9%), whilst the lowest was recorded in the south (5%). The unemployment rate in the central region was 12.8% (LFS ISSP/EAM 2007). Positive trends in employment are evident but problems in the Montenegrin labour market lie not in figures, but in structural unemployment. The demand for labour is almost equal to supply, but the structural component is different. The growth in business activity and investment have made the labour market very dynamic. Demand for highly skilled labour has significantly increased over the last couple of years, whilst the supply of such labour has not. These problems are partly caused by slow reforms in the education sector, which lag behind the high rate of economic development. There is evidence of this with the migration of seasonal employees from around the region. In 2006 more than 20,000 seasonal employees came from abroad, mostly from Serbia and Bosnia, coming primarily to work in tourism and construction. On the other hand, many Montenegrin citizens have migrated to foreign, mainly western countries, and remittances from these workers have provided significant revenues for households. Official data on remittances are available from 2000 onward and show that remittances make up an average of 7% of the GDP (Figure 1.7). According to data from the Central Bank of Montenegro, workers’ remittances and employee compensations present a high inflow of money and make a significant contribution to Montenegro’s economic development. It should be noted that most of the remittances make their way to Montenegro through bank accounts. Some are brought in with migrants coming to Montenegro, or through other channels, making them impossible to record. In addition, a number of Montenegrin citizens work on foreign ships and most of the money earned is not recorded either. Thus, the exact value of remittances coming into Montenegro is most likely much higher than the official figures presented here. According to the annual report of the World Bank (Global Economic Prospects 2006), remittances transferred through illegal channels, if registered, would increase the official remittances figures by at least 50%, in almost all developing countries.

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Employee compensation recorded a growth trend since 2005 and then a sharp decrease to € 50 million in 2006, whilst in 2007, employee compensation reached € 80 million. On the other hand, workers’ remittances are smaller, but have recorded constant growth since 2002. Workers’ remittances reached a level of €92.9 million in 2007. There are fluctuations in the sum of remittances during the period between 2000-2006 when examined as a share of the GDP. Data clearly shows that share of workers’ remittances and employee compensations made up 6.1% of the GDP in 2001 and 7.1% of the GDP in 2007. During this period, the lowest level was reached in 2002 (4,0% of the GDP) and the highest was in 2005 (11.7% of the GDP). According to data for 2007, the payments balance showed that the total amount of remittances was €172.9 million. Of this amount, €92.9 million was transferred to individuals in Montenegro, i.e. workers’ remittances. In addition, €80 million was received through the income account as employee compensation. 1.1.2.

Main Demographical Trends

In the middle of 2006, the total population in Montenegro was estimated to have been 624,241, whilst according to the 2003 Census, the total population amounted to 620,740. The last decade of the twentieth century was marked by population growth. Between two censuses (1991-2003) the population grew by 4.5% with an average annual growth of 0.36%. However, the growth in population came alongside an ageing population. Changes in the population have been impacted upon by various socio-economic events, including the dissolution of the SFRY, wars in the region, sanctions, severe economic crisis, political strife, etc. A positive impact on the total population was caused by natural population growth – the rate of the natural population increase ranged from 4-5 0/00. The birth rate reached 13.313.40/00, whilst the mortality rate increased from 7.20/00 in 1991 to 90/00 in 2003. The increase in the mortality rate apart from socio-economic factors, was caused by an ageing population. Mechanical changes in population had a negative impact on population growth. Migration negatively impacted on population growth. During the mid 90s, Montenegro experienced a temporary inflow of population, mainly refugees from war zones (currently there are close to 24,000 refugees from Croatia, BiH and Kosovo10). On the other hand, Montenegrins have also migrated to other countries, mainly to Western Europe. Whilst since 2000 there has been no data on migration, data from the 90s show that total net migration was negative. The age structure of the population has changed with the share of the population aged over 65, having increased from 9.3% in 1991 to 12.4% in 2003 (Figure 1.8). During the same time, the share of the population aged between 0 and 14 years fell from 25.3% in

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UNHCR, 2007

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1991 to 20.6% in 2003, whilst the portion of the working age population increased by 1.5% to 62.0% (Figure 1.8). According to the 2003 census, the greatest number of Montenegrin citizens declared themselves to be ethnic Montenegrins (43.2%), 31.3% indicated that they were Serbs, 7.8% indicated that they were Bosnian, and 5% indicated that they were Albanian. Compared with the 1991 census, the ethnic structure of the population has changed significantly. Namely, Montenegrins made up 61.9% of the total population in 1991, whilst 9.3% were Serb, 6.6% were Albanian, and 14.6% were Muslim. This change in identity resulted from events in the 1990s in the surrounding former Yugoslav Republic, as well as the referendum process in 2006, when the majority of opponents to Montenegro’s independence declared themselves to be ethnic Serbs. Ethnic Roma and Egyptians make up only 0.5% of the overall population or 2,826 individuals. Such a small number of the RAE population is probably due to the fact that those individuals have identified themselves differently (in some cases as ethnic Montenegrins or Muslims). However, despite the Census data, some estimates indicate that the number of RAE individuals is actually higher. The results of the survey financed by the Council of Europe and OSCE, under the umbrella of the Stability Pact, on registration issues amongst the domiciled Roma population conducted in 2002, indicated that the number of Roma was much higher. According to the results of this survey, the estimated number of Roma with serious problems regarding personal documents is 8700 persons, whilst the average percentage of the Roma ethnic group who do not have an ID card is 14.2%. The majority of the population (41.7%) is resident in the central region (including four municipalities – the capital Podgorica, Niksic, Cetinje and Danilovgrad) of Montenegro, 36.5% of the population live in the northern region (includes 11 municipalities, Bijelo Polje, Pljevlja, Kolasnin, Mojkovac, Berane, Andrijevica, Plav, Rozaje, Zabljak, Savnik, Pluzine) while the remaining 21.8% live in the southern region (six municipalities on the coast – Ulcinj, Bar, Budva, Kotor, Tivat i Herceg Novi) (Figure 1.8). The census data from 2003 indicated that the population in the least developed region – the northern, has decreased, while the population in the remaining two regions has increased. The census results indicated that the population has migrated towards the more developed regions. Of the total population of Montenegro (620,145), 60% of inhabitants have not changed their area of residency, 16% moved but stayed in the same municipality, 14.5% moved from another Montenegrin municipality, while 19.5% moved from other countries, including former SFRY republics. The population in the northern region has continued to fall since the census. Data on internal migration in 200611 indicated that due to migration to other regions in Montenegro, the population in the northern region had been reduced by 0.6%. Life expectancy at birth in Montenegro differs between genders, and records different trends. According to EUROSTAT12 data, the life expectancy at birth for males, in the period of last ten years, is more or less constant (ranges from 70.4 to 71.4). In 2006 it

11 12

MONSTAT, Statistical Year Book 2007 European Commission - Montenegro Progress Report 2007, Statistical Annex, page 46

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was 70.6 years. The life expectancy of females in Montenegro, on the other hand, has fallen in the last ten years from 76.2 in 1997 to 74.8 in 2006 (EUROSTAT). According to the 2003 Census data, the educational profile of the Montenegrin population, in comparison with the 1991 Census, has improved significantly. Amongst the population aged 15 and over, the share of those without any formal education has reduced from 8.9% to 4.9% (Table 1.3). The total number of individuals with primary and less than primary education (including those without formal education) has reduced from 54.7% to 37.5%. On the other hand, the share of those with tertiary education level (college and university) has increased from 8.9% to 12.6% of the total population. The illiteracy rate of the population aged 10 and over has also reduced from 5.9% to 2.35%. 1.2. 1.2.1.

Forecasts and Projections Economic Forecasts

Medium–term projections for Montenegro are for the period from 2008 to 2010, and include government projections from the Economic and Fiscal Program (EFP) for 20082010, which was prepared by the Ministry of Finance in 2007. These projections seem realistic and are in line with expected trends in investments and anticipated reforms for the future (Table 1.4). According to existing projections for the Montenegrin economy, it is expected that the economy will experience further macroeconomic stabilization and economic growth. The GDP is expected to grow by 7% annually both in 2007 and 2008, whilst growth in 2009 and 2010 will be slower (at 6.5% and 5.5% respectively). During the period after 2008, growth will slow down due to the gradual decrease in aggregate demand, the FDI, and because of slower growth in household loans and a decrease in fiscal expansion, which already began to take place in 2007 and 2008. According to these projections, the current account balance will increase in 2008, whilst in 2009 and 2010 it will slightly decrease back to the same level as in 2006.. The export of goods and services is expected to grow at a higher rate than imports, which will improve trade balance. Consumer price inflation is expected to remain at more or less the same level in 2008 as it was in 2007. In 2009 and 2010 it is expected to decrease to 3%. A relatively high inflation, when compared with the EU, is expected for 2008 as a result of wage increases in the public sector. A potential increase in electricity prices will result from changes in oil prices in world markets. The general government balance is expected to be positive during the observed period at around 1% of the GDP. An expansive fiscal policy in 2008, due to increased wages in the public sector, will increase public spending from 29.6% of the GDP to 33.6% of the GDP. However, from 2009 the government will implement a more restrictive fiscal policy that will lead to a decrease in public spending to 30.9% of the GDP by 2010. The restrictive policy should also contribute to reducing the public debt to 30.9% of the GDP (35.6% in 2006). 15

Spending on social protection, such as health care, old-age pensions and social assistance, accounted for 19.2% of the GDP in 2006. Nonetheless, a mid-term budget framework anticipates a reduction of 17.5% in the GDP by 2010. 1.2.2.

Demographic and Labour Force Forecasts

According to most recent projections of the Montenegrin population (Bacovic 2006 and UN ESA Population Division 200513) there will continue to be growth in the population until 2021, after which the size of the population will begin to decline. The estimated population in the middle of 2006 was 624,241. It will increase to 643,844 in 2021, but will fall to 596,693 by 2050, a decrease of approximately 5% The population over the age of 65 will make up 15.6% of the total population by 2021, while projections indicate that more than one fifth of the Montenegrin population will be over 65 years of age (22.4%) by 2051 (Figure 1.9). The working age population will also grow to 66.3% of the total population in 2021 and then fall to 62.7% in 2051. Life expectancy at birth for the Montenegrin population will increase to 79.5 in 2050, with 77.1 years for males and 81.9 for females.14 As a consequence of the change in the population structure, the activity rate of the Montenegrin population will gradually increase reaching 65% by 2020 and 70% by 2050. During the same period, the unemployment rate is expected to fall below 10% by 2010, and than to stabilize at 5% by 2030.15 1.3.

Influence of Economic Social and Demographic Trends on Social Protection

Positive economic developments, especially over the last couple of years, and growth expectations for the future will contribute to a reduction in social exclusion in Montenegro. However, the social protection system and policy responses to existing problems have to be carefully designed to create an efficient, responsive and adequate system. The labour market is improving but there continue to be issues that need to be addressed, including the high level of undeclared work, which indicates that there is a strong presence of low quality jobs. Moreover, long-term unemployment is a serious problem, causing a reduction in potential for those out of work. People with disabilities and those belonging to socially excluded groups (Roma population) must be better integrated into society. Bearing in mind that unemployment is the key cause of poverty, a dynamic and functioning labour market is one of the main mechanisms for alleviating poverty. The position of women in the labour market is improving. However, the activity rate of the female population is still low. The policy challenge for the future will be to increase activity, not only amongst women, but also in the overall population of working age. 13

Bacovic M. – Demographic Changes and Economic Development, ISSP, Edition Idea, 2006 and UN ESA – World Population Prospects: The 2005 Revision, 2005 14 UN ESA – World Population Prospects: The 2005 Revision, 2005 15 Economic Reform Agenda, GOM 2005

16

Demographic trends in the medium-term and especially in the long-term perspective will have an important impact on social protection in Montenegro. The ageing population will influence almost every aspect of the social protection system in Montenegro, especially the pension system and the health and the long –term care systems. In the long term, a high level of undeclared work could have a significant impact on the social assistance system, and could also present a moral hazard to those currently engaged in the informal sector.

17

1.4.

References for the Chapter 1

1. Babic M. – “Makroekonomski modeli”, Narodne novine, Zagreb, 1990 2. Bacovic M. – Demografske promjene i ekonomski razvoj – analiza investicija u humani kapital, ISSP, Ideja, Podgorica, 2006 3. Blanchard O. and Giavazzi F. – Macroeconomic Effects and Deregulation in Goods and Labor Market, National Bureau of Economic Research, Cambridge, February 2001. 4. Funck B. i L. Pizzati - Labor, Employment, and Social Policies in the EU Enlargement Process: Changing Perspectives and Policy Options”, World Bank, Washington, 2002. 5. Economic Reform Agenda 2002-2007 - Government of Montenegro, 2005 6. Employment Agency of Montenegro-Employment, Unemployment, Economic Policy and Migrations in Montenegro, Podgorica 2005 7. Employment Office of Montenegro – National Employment Strategy (draft), 2007 8. Employment Office of Montenegro – National Action Plan, 2007 9. European Commission-Employment and labour market in Central European countries, Brussels, 2001. 10. European Commission – Employment in Europe 2006, Brussels, 2006 11. European Commission – Employment in Europe 2007, Brussels, 2006 12. European Training Foundation – ETF Country Plan Montenegro 2007, ETF, 2007

18

13. European Training Foundation – Labour Markets in the Western Balkans, Challenges for the Future, ETF, 2007 14. European Commission – Montenegro 2007 Progress Report, EC, November 2007 15. ISSP/EAM – Labour Force Survey 2007, ISSP and Employment Agency of Montenegro, 2007 16. ISSP – Montenegro Economic Trends, Issues 15-25, Podgorica 17. MONSTAT – Labour Force Survey 2004, 2005,2006, Podgorica, 2004-2006 18. MONSTAT – Statistical Year Book, 2000, 2004,2005, 2006, Monstat 2000-2007 19. MONSTAT – Monthly Statistical Review, issues from 2005, 2006 and 2007, MONSTAT 20. Rasevic M. – Fertility and reproductive health of Montenegrin population, UNICEF, 2001

19

1.5.

Statistical Annex for the Chapter 1

Figure 1.1. GDP growth rates (1991-2007) 40.0% 30.0% 20.0% 10.0% 0.0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -10.0% -20.0% -30.0% -40.0%

Sources: ISSP, MONSTAT, and Ministry of Finance Figure 1.2. GDP index (1989=100)

120

100

%

80

60

40

20

06

05

04

03

02

01

00

99

98

97

96

95

94

93

92

91

90

07 20

20

20

20

20

20

20

20

19

19

19

19

19

19

19

19

19

19

19

89

0

Source: MONSTAT and Montenegro Transition Report, ISSP 2003

20

Table 1.1: Key macroeconomic indicators in Montenegro GDP GDP real growth rate Population Heavy industry Inflation rate (CPI) Unemployment rate Average wage General government balance General government debt Interest rate, annual, active Interest rate, annual, passive Export of goods and services (m €) Import of goods and services (m €) Current account balance (m €) Net FDI (m €)

€ mil.current Ann.% ch Mid year Ann.% ch Ann.% ch % Ann.% ch % of GDP % of GDP % p.a. % p.a. % of GDP % of GDP % of GDP % of GDP

2003

2004

2005

2006

2007

1,510.1

1,669.8

1,815.0

2,148.9

2,447.5

2.4 617,085 2.4 6.8 25.8 n.a. -1.9 21.1 14.07% 1.84% -16.1 -15.7 -7.3 2.8

4.2 620,278 13.8 2.2 22.6 11.7 -2.4 44.9 13.50% 3.39% 67.1 37.9 -7.2 3.1

4.0 622,118 -1.9 2.4 19.0 8.0 -2.7 40.4 12.60% 4.15% 1.9 12.2 -8.9 22.0

8.6 623,277 1.0 3.0 14.7 15.6 1.1 35.6 9.9% 4% 40.7

7.0 624,240 0.1 4.2 11.9 14.2 8.5 32.4 -

53.7 -26.0 21.7

-26.0 23.0

Source: DG ECFIN, 2007

Figure 1.3. CPI annual inflation (December over December)

120

100

80

60

40

20

0 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Source: MONSTAT

21

Figure 1.4: Central budget deficit/surplus in period 2000-2007 (% of GDP)

8 6 4 2 0 -2 -4 -6 -8 -10 2000

2001

2002

2003

2004

2005

2006

2007

Source: Ministry of Finance

Figure 1.5: Annual growth rates of average net wage (1996-2006) 120 100 80 60 40 20 0 -20

1996

1997

1998

1999

2000

2001

Nominal

2002

2003

2004

2005

2006

Real

Source: MONSTAT, Wages in Montenegro 1965-2005, Monthly Statistical Reviews for 2006

22

Figure 1.6: Activity rate (15-64) 62.00 60.00 58.00 56.00 54.00 52.00 50.00 1991

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Source: MONSTAT Census 1991, LFS 2004-2006, and Federal Statistical Office LFS 1996-2003

Table 1.2. Activity rate of population aged from 15 to 64 by age groups group 15 - 19

13.6%

20 - 24

49.3%

25 - 29

70.9%

30 - 34

76.7%

35 - 39

77.5%

40 - 44

74.4%

45 - 49

69.8%

50 - 54

66.4%

55 - 59

56.2%

60 - 64

27.5%

Source: LFS 2007, ISSP/EAM

Figure 1.7: Remittances as a share of GDP 14 12

11.7

10

9.9

8 6

6.2

4

6.6

6.2

7.1

4

2 0 2001

2002

2003

2004

2005

2006

2007

Source: Central Bank of Montenegro

23

Figure 1.8.Teritorial division of Montenegro

Northern region Central region Southern region

Figure 1.9:Population pyramids (2003)

100

Male

Female

Age

80

60

40

20

0 6000.00

4000.00

2000.00

0.00

2000.00

4000.00

6000.00

%

Source: MONSTAT, Census 2003

24

Table 1.3: Population by educational attainment Without formal education

1991

2003

8.9%

4.9%

Less than primary school

16.3%

9.6%

Primary school

29.5%

23.0%

Secondary education

35.0%

48.4%

College

3.8%

5.0%

University education

5.0%

7.5%

Unknown

1.5%

2.1%

Source: Monstat, Census 1991 and 2003

Table 1.4: Macroeconomic Indicators, projections 2008-2010 2008 7.0 4.0 3.7 10.8 0.7 12.1 8.5 -33.27 -30.57 5.8

Real GDP growth % Inflation (CPI), % Employment growth, % Unemployment rate, % General Government balance, % of GDP Growth of exports of goods and services, % Growth of imports of goods and services Trade balance, % BDP Current account balance, % BDP Growth of gross fixed capital formation %

2009 6.0 3.5 2.1 9.8 1.0 11.3 7.7 -30.89 -28.79 -1.3

2010 5.5 3.0 2.1 8.8 1.1 14.2 6.1 -26.01 -23.91 -1.4

Source: Economic and Fiscal Program, Ministry of Finance, 2007

Figure 1.10: Population pyramids 2031 and 2051

2051

2031

101

101 Female

Male

Male

Female

81

81

61

61

41

41

21

21

1 -7,000

1

0

7,000

-7,000

0

7,000

Source: Montenegro Pension Reform Project, 2004

25

2.

Chapter 2. Social Protection and the Social Welfare System

2.1. 2.1.1.

Current Structure Overview of the Social Protection System

The Ministry of Health, Labour and Social Welfare (MHLSW) is the main institution in Montenegro charged with social protection. The Ministry covers all areas of social protection, family and child protection, pension and disability insurance, health insurance and unemployment insurance. Prior to independence, social protection in Montenegro was organized under the umbrella of two ministries – the Ministry of Labour and Social Welfare and the Ministry of Health. The post-independence government formed in 2006 reduced the number of ministries and the Ministry of Health and Ministry of Labour and Social Welfare were merged into one ministry – the Ministry of Health, Labour and Social Welfare. The Ministry’s work is organized through seven departments that cover the overall social protection system in Montenegro. The departments are: 1. Health Protection Department – monitors health protection regulations, reports on the health status of the population and undertakes corresponding measures. 2. Department for Health System Management – is in charge of legislative activities in the area of health insurance and prepares proposals for changes in legislation. 3. Department for Pension and Disability Insurance, Veterans and Disability Protection – is in charge of pension system reform, pension system policy, as well as the protection of veterans and disabled persons. 4. Department for Social and Child Protection - is in charge of protecting the family, protection from social exclusion, especially those disabled, children without parental care, etc. 5. Department for Labour Market and Employment is in charge of unemployment insurance and employment policy in Montenegro. 6. Department for Labour Relations is in charge of legislation in the area of labour relations and collective bargaining. 7. Department for IT and Statistical and Analytical Work is in charge of improvements in the IT system of health and social protection, and the collection of SP data. The main organizations responsible for implementing the activities of the social and child sectors are the Centres for Social Work (CSW). The CSWs implement the law on social and child protection at a municipal level. This includes identifying beneficiaries of cash assistance, providing opinions to the court for custody and juvenile delinquency cases, and for providing counselling services upon request.

26

There are ten CSWs, each located in one of the 21 municipalities in Montenegro. Eight CSWs are also responsible for the municipality in which they are situated as well as for surrounding municipalities16, with their work carried out through Services for Social Work (SSW). All municipalities have either a CSW or a SSW located in the principle municipal town. Each SSW is linked with the nearest CSW. In general SSWs are located in smaller municipalities and do not have the required staff to form a CSW17. However, there is no CSW that has all the required staff (Table 2.2). The common connection between the CSWs and the SSWs is that the CSW holds the legal authority to make decisions in the first instance on cash benefit provided; on management of the accounts; forwarding benefit information to the MHLSW; providing services to process the payment for the carer’s allowance; forwarding necessary funds for one-time assistance and care in institutions outside of the Republic; and, for facilitating the payment of cash benefits and other financial requirements of the SSWs and CSW. The SSW may also request a professional staff member from the CSW to visit a beneficiary. Some CSWs have regular staff who rotate weekly through the CSW and the SSWs to provide assistance, in others, selected staff of the SSWs are members of the first instance benefit decision-making teams. In other areas the connection is limited to occasional correspondence. By organizing the CSWs in this way, all municipalities are able to have access to all cash benefits and social services provided by a CSW. The staff of the CSWs and SSWs should predominantly be professionals, including social workers, psychologists and teachers for children. The requirements for these professionals are indicated in MHLSW decrees. They are not based on assessed needs in the community or on a required staff profile for carrying out the CSW/SSW activities. These professionals do use some of their social service professional skills to carry out the social assessment for a benefit, and are involved in instances of court referrals; however the majority of their time is spent administering cash benefits and inspecting documents. Social workers spend well over 50 percent of their time on cash benefits18. Some CSWs and SSWs have been able to organize themselves in such a way that lawyers and administrators process the documents. These same professionals are often involved in multiple benefit teams, spending a lot of time in meetings, determining whether or not a person should obtain cash benefits. The inter-municipal nature of some CSWs through SSWs is an effective way to provide all municipalities with professional staff. However, in practice some of the SSWs fulfil the CSW role with the CSW rubber-stamping their decisions. Some of the SSWs actually do have adequate staff who are qualified to cover social service requirements as well as administration. (See table 2.1. in annex) Aside from the MHSLW and CSW and SSW, the Montenegrin social protection system includes three extra budgetary funds, which are charged with the implementation of 16

CSW Podgorica covers three surrounding municipalities Cetinje, Kolasin and Danilovgrad, Niksic CSW covers also Pluzine i Savnik, Kotor CSW covers Tivat and Budva municipalities, CSW Bar covers Ulcinj, CSW Berane covers Andijevica, CSW Bijelo Polje covers Mojkovac, while Pljevlja CSW covers also Zabljak municipality. 17 According to a MHLSA regulation all CSWs must be staffed by a lawyer, social worker, economist, defectologist, psychologist and pedagogue. 18 Information obtained from the interview with the CSW’s staff from Niksic, Podgorica, and Bijelo Polje.

27

insurance-based social protection – the Pension and Disability Fund (PIO Fund) for pension and disability insurance, the Health Insurance Fund (HIF) for health insurance, the Employment Agency (EAM) for unemployment insurance and active labour market measures. Although these funds are independent public institutions, their work is supervised by the MHLSW, and since 2008 they have been included in the treasury system of the Ministry of Finance. Moreover, residential institutions are providers of social care services. There are nine institutions providing care for young persons with disabilities, foster care facilities and elderly persons’ facilities. The MHSLW has established six of these institutions and covers staff costs, whilst for institutions in charge of the education of children and youth, the Ministry of Education has established and finances three institutions. 2.2.

Social Protection Financial Benefits and Allowances

The social protection system in Montenegro provides a wide range of financial benefits to citizens, including both contributory and non-contributory benefits (see table 2.1. for details). 2.2.1.

Contributory Benefits

2.2.1.1.

Unemployment Benefits

Unemployment benefit is provided to individuals based on the following eligibility criteria: persons who have been insured continuously for nine months, or 12 months with breaks in the last 18 months are eligible for unemployment benefits, if they submit a claim within 42 days of the date when the employment was terminated, stating whether the employment was terminated voluntarily or whether the loss of job was due to their own fault. Additionally, as an exception, young persons with disabilities (whose disability occurred before the age of 18), who have completed specialized vocational education, are entitled to this benefit while they are seeking a job. The period in which the unemployed person is eligible for benefit depends on the corresponding insurance period. Eligibility for benefit is as follows: - 3 months if he/she was insured continuously for 9 months, or for 12 months with breaks in the last 18 months - 6 months if he/she was insured continuously for 30 months, or for 50 months with breaks in the last 5 years - 9 months if he/she has 5 to 15 years of working experience - 12 months if he/she has over 15 years of continuous insurance. In addition to this, if the insured person has over 30 years of working experience, he/she is entitled to unemployment benefit until he/she becomes employed or becomes eligible

28

for retirement. The exception to this rule is mothers who, after delivery, are eligible for this benefit during a 12 month period. The unemployment benefit amount is set at 65% of the national basic minimum wage, and currently amounts to 37.5€ (net terms), plus paid social security contributions. Relative to the average wage, the unemployment benefit is quite low, and thus cannot be treated as an important supporting measure for those who lose their job. The average expected duration of benefit in Montenegro is about 12 months. If only those who are currently obtaining benefit are taken into account, the average duration increases to 48 months. This stems from the fact that most of the current recipients belong to groups with open-ended benefits. These are mainly older workers from public companies that went bankrupt. Besides the benefit, every unemployed person, as well as family members is entitled to health insurance (if the insurance is not provided otherwise). In 2007, an average of 8.240 persons or 21.1% of the unemployed were receiving unemployment benefit, which is an enormous increase from 2002 when the number of beneficiaries was 2,325. 2.2.1.2.

Maternity Leave

Individuals eligible for maternity leave are insured mothers, whose minimum period of insurance prior to the start of their term of leave was 6 months continuously. The Ministry of Health, Labour and Social Affairs is charged with the administration of this benefit. Mothers are eligible for full salary compensation for a period of one year. Prior to delivery, 45 days before the determined delivery term, the pregnant woman can take her pregnancy leave, whilst 28 days prior to delivery she is obliged to take leave. Usually, the employer pays the salary to the mother and than applies to Ministry to be refunded. According to the Labour Law, insured fathers can take a paternity leave instead of the wife. The number of beneficiaries of maternity leaves shows a falling trend, namely in 2007 there was an average of 1,187 beneficiaries, i.e. number of mothers on maternity leave, whilst seven years earlier there was an average of 1,531 beneficiaries. This is in line with demographic trends of a decreasing number of births. (Table 2.3.) 2.2.1.3.

Sickness Benefit

Every employee is entitled to sickness benefits in the case of illness or injury. During the period of leave every employee is entitled to full salary compensation. In the case that the leave period is shorter than 60 days, the employer has to pay the cost. If the period of leave is longer than 60 days, the Health Insurance Fund compensates the full salary of the employee/insured person. However, if the leave is over 6 months, prior to approval of further leave, the medical commission of Health Insurance Fund and Pension Insurance Fund is required to asses

29

the ability of the person to work and to assess whether this person has become eligible for retirement due to disability. 2.2.2.

Social Assistance Benefit

Social assistance benefits are means tested and categorized benefits. They are divided into two large groups: family/individual assistance benefits and child protection benefits. Family/individual assistance benefits are assistance provided to individuals/families in order to reduce their vulnerability. The child protection benefits are aimed at reducing the risk of poverty and vulnerability to children in poor families, as well as to children with disabilities. 2.2.2.1.

Family/Individuals Assistance Benefits

Basic family/individual social assistance benefits are: family material support; carers’ allowance, personal disability benefit; health protection; funeral costs; and single payments. 1. Family material support (MOP19) is a basic form of social assistance. Those eligible for this benefit are families, or family members who unable to work. Individuals able to work are also eligible if they fulfil one of following conditions: pregnancy, single person, parent supporting a dependent child or child who is unable to work (whose disability occurred before the age of 18), and child without parents until employment, child with special needs who has finished special vocational training. The family material support is a means tested benefit, and families that satisfy the following conditions are eligible: 1) amount of monthly income from the previous quarter does not exceed 50€ for single-member families, 60€ for two-member families, 72€ for three-member families, 85€ for four-member families and 95€ for families with five or more members, 2) does not own or use business space, 3) does not own or live in an apartment or building in an urban or suburban area larger than: one-room apartment for single-member families, two-room apartment for families with two or three members, three-room apartment for families with four or more members, 4) does not own or use agricultural land or forest area larger than: 2000 sq meters for single-member families, 3000 sq meters for two-member families, 4000 sq meters for three-member families, 5000 sq meters for four-member families, 6000 sq meters for five- or more member families, or does not own or use agricultural land that exceeds 20000 sq meters. 5) family member has not refused offers of employment or training; 19

Abbreviation for ‘materijalno obezbjedjenje porodice’ or family material support

30

6) family member has not voluntarily terminated employment, or the employment was not terminated by his/her fault; 7) family member has not received severance payment after job loss, except if it this right was effected at least six moths ago; 8) family member has not sold any immovable assets or denied his/her right to inheritance; 9) family member does not owns movable assets by which the family existence is secured, 10) family member has not concluded contract on lifelong support except with CSW. The monthly family material support benefit is fixed in the new law and ranges from 50€ for a single-member family to 104.5€ for a five- or more member family. Adjustments in the amount of benefits according to the law are made based on the financial state of the central budget.20 The first adjustment in the level of benefits was implemented in 2007. The current amount of the MOP benefit is: 1) single-member family

55 €;

2) two-member family

66 €;

3) three-member family 4) four-member family 5) five- or more member family

79.2 €; 93.5 €; 104.5 €.

The procedure for obtaining MOP benefits is a time consuming and requires a lot of documentation from the applicants. Every three months beneficiaries must also renew some of the documentation, and every six months all of the documentation. Since the procedure for obtaining MOP is under the authority of CSW, these institutions have a high level of discretionary powers, sometimes resulting in different interpretations of the law and the further complication of an already complicated procedure. In addition to this, MOP benefit is to some extent discriminatory for larger families. For example the MOP amount is 20% higher for a two member family when compared with a single member family, and by the same percentage for a three member family when compared with a two member family. The amount of MOP for a four member family is 18% higher when compared with a three member family, whilst the increase for five or more member families is just 11.8%. Also, by keeping the same amounts for five or more members families, the MOP discriminates against the RAE population, bearing in mind 20

According to the old law the amount of family material support has adjusted to a change in the average republic net wage in the previous quarter.

31

that these families usually have more than five members, as well as the poorest families, as large families are more prone to poverty. . The number of MOP beneficiaries is constantly increasing; in 2007 this benefit was given to 12,741 families in Montenegro, which is almost double compared to 2000, when 7,936 families received this benefit (Table 2.4). The reasons for such increases are the change in eligibility to this benefit in 2001 (persons able to work have became eligible), and a better-informed public on the possibilities of receiving this benefit. The average size of the benefit in 2007 was 76.74€. However, since the criteria for minimum monthly income is set at a relatively low level, and is less than 50% of the per capita poverty line (see chapter 3 for details), the MOP benefit is not available to many poor families (only 13.3% of poor households). Also, targeting of this benefit has been inaccurate. More specifically, only 55% of total spending in this category has gone to the poorest 20 percent of the population, whilst the remaining 45% has gone to those not considered poor.21 2. Personal Disability Benefit. The new Social Protection Law from 2004 introduced this benefit. Those eligible for this benefit are persons whose inability for independent life was determined before the age of 18. The amount of this benefit is €50 per month. The personal disability benefit was given to 1,299 individuals in 2007 (Table 2.5). 3. Carers’ Allowance. This benefit is provided to users of family material support who, due to a physical or mental disorder, need the permanent care and assistance of another person and who are also beneficiaries of the personal disability benefit. Previously, MOP beneficiaries were not the sole beneficiaries of the benefit. Under the previous law, MOP beneficiaries received the full amount (50€) whilst other beneficiaries received 60% of the full amount (30€). In 2007 the carers’ allowance benefit was given to 5,736 individuals (Table 2.6.). 4. Health Protection is provided to MOP beneficiaries, personal disability benefit recipients and persons accommodated in residential institutions or foster families. 5. Funeral Costs are covered in the case of death of the following beneficiaries: MOP beneficiaries, personal disability beneficiaries, persons accommodated in residential institutions or foster families. The amount of this benefit is 300€. 6. Single Payments is a benefit provided to families or individuals who, due to special conditions related to accommodation, health and material status, have a social need. 2.2.2.2.

Child Protection Benefits

Basic child protection benefits are: birth grants; child allowance; benefits for employed and unemployed females for child birth, compensation of salary for part-time work; and holiday and recreation costs for children (Table 2.7). 21

Krsmanovic, Vojonovic – “Public social assistance and the poor -coverage and effectiveness”, Policy Paper, ISSP, 2006

32

1. Birth Grant is a universal benefit. The parent has a right to receive 100€ as compensation for every newborn child. In 2007 there were 6,540 beneficiaries of this benefit. 2. Child Allowance is a benefit for children whose families are MOP beneficiaries children with physical, mental and sensory disorders, who can be educated and trained for normal life and work, children with physical, mental and sensory disorders who cannot be educated and trained for normal life and work, and children without parents. Only the first three children of a family are eligible for this benefit. The monthly value of this benefit is: 1) 16.5 € - for MOP beneficiaries; 2) 22€ - for children with physical, mental and sensory disorders who can be educated and trained for normal life and work; 3) 27.5€ - for children with physical, mental and sensory disorders who cannot be educated and trained for normal life and work; and 4) 27.5€ - for children without parents. Until 2001, child allowance was a universal benefit. However, in the third quarter of 2001, eligibility became limited only to a listed group (see Figure 2.1). Whilst this benefit required a significant amount of money, policy-makers assessed that its impact on non-poor families’ welfare was limited. However, bearing in mind that child allowance is currently limited to only the “official poor” on one hand, and that and that that the MOP leaves out many poor households, this benefit also is not properly targeted. Child allowance also discriminates against families with more than three children, who usually belong to RAE population. In 2007 18,524 children received this benefit (Table 2.7). 3. Benefits for Employed and Unemployed Females for Childbirth is actually comprised of two benefits: salary compensation during maternity/paternity leave (discussed earlier in the text) and compensation for unemployed mothers and full-time students. Compensation for unemployed mothers and full-time students is available for those eligible for this benefit during a one-year period. The amount of this benefit is 25€ monthly. 4. Compensation of Salary for Part-Time Work is a benefit for parents who have to be absent from work to take care of a sick child. The employer pays the full salary to the employee and is then refunded by the Ministry of Health, Labour and Social Welfare.

33

2.2.3.

Veterans and Disability Protection

The veterans and disability protection is also provided by the MHLSW, however, it is separate from family and child protection. This area of social protection is regulated by the Law on Veterans and Disability Protection that was adopted in 2003 (Official Gazette of Montenegro 59/03), and applied from 2004.22 Beneficiaries of this protection include veterans and civilians and victims of the following wars: the Balkan wars, World War I, World War II, and those who participated in the operations of the Yugoslav Army after August 17, 1990. There are eleven different benefits provided in this area of social protection: personal disability benefit, supplement for a carer’s allowance, orthopaedic supplement, family disability benefit and increased family disability benefit, family material support, family allowance, health protection and other rights in the area of health protection, orthopaedic and other apparatus, health spa and climate treatments, free and subsidized transport, and funeral costs. (Table 2.8 in the Annex). The personal disability benefit, family disability benefit and increased family disability benefit, supplement for carers’ allowance, orthopaedic supplement, family material support and family allowances are determined as a monthly amount as a percentage of the base. In the Law, the base is set at 307€, with adjustments made on a semi-annual basis as a combination of average wage increase and the inflation rate (50% wage increase plus 50% of the inflation rate measured by the cost of living index). Disabled veterans are divided into 10 groups according to their degree of disability. Civilians who became disabled during the war are divided into 7 groups, also depending on the level of disability. In 2007 there were 1,452 veterans who were beneficiaries; the number of military invalids was 5,282, whilst the number of civilian victims of war was 526. The number of families receiving some of the listed benefits was 413. 2.2.4.

Other Social Benefits

Aside from the listed benefits, incorporated in the laws are a number of benefits regulated by bylaws and other regulations. Additional benefits provided to Montenegrin households are: •

coverage of costs in institutions outside of Montenegro,

•

cost of food in kindergarten – for the poorest families,

•

subsidized public transport for disabled persons, and

22

Old laws regulating this area were enacted in 1997 – Law on Material Support and Other Rights of Veterans, Military Invalids, and the Members of their Families and Law on Protection of Civil Disabled Persons

34

•

health protection for disabled persons.

Besides these benefits provided by the MHLSW, there is another social benefit – a benefit for elderly farmers, which the Ministry of Agriculture, Forestry and Water Resources is in charge of. This benefit was introduced by the Ministry of Agriculture, as a form of assistance to farmers who spent their lives working in agriculture, since previous legislation did not provide farmers with the possibility of paying insurance. Those eligible for this benefit are all elderly framers with agricultural land, who have paid taxes regularly, and who do not receive any other benefits. The amount of this benefit is 40€ per month. Besides national benefits, some municipalities have additional benefits for their citizens. For example, in the municipality of Podgorica, every newborn receives a birth grant, which currently amounts to 100€. An important benefit that has been introduced recently is a subsidy for electricity bills. High prices of electricity, caused by the high import prices and the rise in domestic prices, have caused the average electricity bill in Montenegro to reach one quarter of the average wage. Beneficiaries of the electricity bill subsidy are beneficiaries of the family material support benefit, personal disability benefit, carers’ allowance benefit, foster family accommodation beneficiaries and beneficiaries of family material support for veterans. The subsidy is determined as 30% of an average minimum electricity bill for a four-member household (37.23€) or 11.2€ monthly. The subsidy is paid every three months. The total number of beneficiaries in 2007 was 20,829 families/individuals. This subsidy may represent an important source of revenue for poor families, since the utility cost for poor families on average makes up 15%23 of total household expenditure. Recently, the government of Montenegro prepared a revised program on subsidies for electric power that will be introduced after the announced increase of electricity prices. This program will include about 20.000 beneficiaries with rights emerging from the Law on Social Protection for Children, Invalids and Veterans, and about 100,000 of the so called “average” consumers whose annual consumption does not surpass €12.000. The program is worth €10 million. The logic behind the Program is the following: the government will subsidize 20% of the monthly bill, whilst “average” consumers whose bills are between €15 and €60 will finance a part of the bill that will be calculated on the basis of the new price. The new program will be put into force at the time of preparation of the bills for the month of June and will remain in operation until May 31st 2009. 2.3.

Provision of Social Services

In addition to financial benefits, the social protection system in Montenegro provides social services to citizens. According to the legal framework, social work services are: preventative activities; diagnostic treatments; and counselling-therapeutic work, institutional and non-institutional care. However in reality, social services provided by the MHLSW are limited to: institutional care provided by nine residential institutions, 23

Krsmanovic, Vojonovic – “Public social assistance and the poor -coverage and effectiveness”, Policy Paper, ISSP, 2006

35

foster care for children placed within their extended families, counselling for the court in divorce and custody cases, counselling for the courts in cases involving young offenders, and other programs. 2.3.1.

Preventive Services

Measures of social prevention are aimed at individuals, families, and groups with the aim of preventing social risks. Centres for social work have been charged with the provision of these services; however, this is the least developed part of the social care system and does not represent and important part of CSW’s activities. The MHLSW has attempted to include a “social work” aspect into the social protection system by including mandatory social analysis of the family as part of the application process. However, rather than being a way to enter into a therapeutic relationship, it results in an inspection process. In some cases the CSW/SSW identifies issues in a family (such as drug abuse) or a “dysfunctional” relationship, but has limited capacity for intervention. In examples of these cases, the goal of social workers is to try and obtain cash benefits for them, rather than to consider other alternatives, such as therapeutic social work intervention or referrals to other organizations that may be able to provide assistance to the family. Services are provided primarily after being referred by the court system. In these instances the CSW/SSW designated staff person “talks” with the person in question in order to form an opinion for the court. In the case of young offenders of lesser crimes, the result is usually a recommendation that parents should increase their level of supervision over the child. In the case of drug use, the recommendation may be a drug rehabilitation program. Nonetheless, these services are limited in Montenegro. In divorce cases, if after “talks” the couple still wants to divorce, the CSW/SSW offers an opinion on which parent should hold custody. In this process there is little family counselling. 2.3.2.

Institutional Care

Institutional care services provided by the social protection system in Montenegro include accommodation in a residential institution, assistance through a professional rehabilitation program, work enablement, and holidays and recreation. Accommodation in a residential institution is a benefit provided to children without parents and children whose development is disturbed by the family situation, children and youth with mental and sensory disorders, children with behavioural disorders, persons with physical, mental and sensory disorders, and mature disabled persons, to whom protection cannot be provided any other way. This benefit is effected by covering the cost of living in the institutions. The users can also sign a contract with the residential institution, thereby agreeing to cover the overall costs. Assistance for professional rehabilitation and work enablement is a benefit aimed at children and youth with special needs. This assistance includes: cost of accommodation in a residential institution or foster family, and cost of transportation.

36

These services are provided through a network of public institutions, which include: - Public institutions for children without parents and parental care. There is only one institution in Montenegro, situated in Bijela (in the southern region). This institution has a 200 bed capacity, in which there are currently approximately 180 children accommodated. - Public institution ‘1. Jun’ for the education and professional rehabilitation of children with some physical or mental disorders. There are two institutions that provide preschool, primary and secondary education to its beneficiaries. The institution situated in Kotor (in southern Montenegro) provides education and professional rehabilitation to children with speech and hearing disorders. Currently there are 100 children that reside in these institutions and an additional 30 who only attend schools. The second institution is in Podgorica, and provides education and professional rehabilitation to children and youth with mild mental disorders, as well as autistic children. In the special primary school within this institution there are 77 pupils enrolled, whilst the specialist secondary school has 58 pupils enrolled, and pre-school has 5 children enrolled. - The public institution ‘Komanski most’ for children and youth in Podgorica accommodates children and youth with moderate and severe mental disorders as well as autistic children and youth. The capacity of this institution is 150 beds for persons aged between 7 and 27 years of age. There are currently 137 persons accommodated. - The public home ‘Grabovac’ for the elderly in Risan (southern region) accommodates the elderly, people with chronic diseases and persons with disabilities. The capacity of the institution is 315 beds, and currently accommodates 290. - The public institution for children and youth with educational and social problems and behavioural disorders. - The day care centre in Bijelo Polje is a first alternative measure for social protection of children disturbed in their development. This institution was established with the support of the local government, UNICEF and Save the Children. The number of persons accommodated in residential institutions has remained more or less the same throughout the years. The majority of institutions have additional capacity to accept clients. Exceptions to these include the home for the elderly in Risan and the home for people with moderate to severe mental disorders. These homes are now accepting patients beyond their original mandate. The home for the elderly accepts younger adults with physical disabilities, who are psycho-physically ill, and those with mental illnesses. Komanski Most, designed for children, also accepts adults. There have been no studies referring to the quality of services provided in residential institutions. Institutional care has been reviewed only in terms of capacities and possible reallocation by regions; however no concrete activities have been implemented. The Strategy for the Development of Social and Child Protection anticipates that this type of social protection will be enhanced in terms of quality of services in residential

37

institutions, and with support for faster care and the inclusion of the private sector through charity activities as well as through the outsourcing of care services. 2.3.3.

Non- Institutional Care

Non-institutional care in the system provides two basis benefits: accommodation with foster families, and holidays and recreation for children. Accommodation in foster families is a services provided to persons listed as eligible for accommodation in residential institutions, as well as for pregnant woman and single parents until the child is three years of age, who need this kind of protection. Foster families, apart from covering the costs of accommodating the beneficiaries, receive a certain amount in compensation. Usually the foster family is part of the beneficiary’s extended family. On average, accommodation in foster families benefit amounted to 214.7€ in December 2007. Holidays and recreation is a benefit for children whose families are MOP beneficiaries or for children accommodated in institutions or foster families. Children are able to stay free of charge at a holiday resort on the coast. 2.4.

Financing Social Protection in Montenegro

Social protection in Montenegro has two mains sources of financing – transfers from the central government budget and contributions paid by insured persons. The social assistance part of expenditures, child and parental protection, is financed directly from the central budget. The insurance-based social protection is financed from respective contributions, whilst any deficit is covered by transfers from the central government budget. Contributions for pension insurance currently (2008) amount to 21% of the gross wage (out of which 12% is paid by employees and 9% by employers) and will be reduced to 20% by 2010 (out of which 12% is paid by employees and 8% by employers). The health insurance contribution is currently 12% of the gross wage (out of which 6.5% is paid by employees and 5.5% by employers), and will be reduced to 9% (out of which 4% is paid by employees and 5% by employers) by 2010. Unemployment insurance contributions amount to 1% of the gross wage, out of which employees pay 0.5% and employers 0.5% Non-contributory benefits are financed by central budget revenues. Social protection spending in Montenegro, both contributory and non-contributory, according to the 2007 budget execution report, amounted to €426.9 million or 17.44% of the estimated GDP (Table 2.10). Social protection benefits and allowances make up 15.8%24 of the GDP, while social care, social services and measures made up 0.52% of the GDP in 2007. Other costs, which primarily relate to the cost of institutions responsible for social protection, make up 1.13% of the GDP. Social assistance benefits make up 1.23% of the GDP, whilst contributory benefits make up 14.57% of the GDP. 24

Includes public health expenditure.

38

Since 2000, social protection spending has changed significantly, in terms of the total amount spent as well as in the structure of spending. Compared to 2000, in 2007 the share of benefits in overall spending has increased, whilst the cost of institutions has fallen. The changed structure of social protection spending indicates better management of these funds, and an intention to reduce the system costs whilst increasing benefits accordingly. 2.5.

Implemented and Planned Reforms

After the dissolution of the SFRY and the establishment of the Federal Republic of Yugoslavia, due to the economic recession, international sanctions and wars in surrounding countries, the standard of living of the Montenegrin population went down.. All this created a need to change the social protection system. The social protection system has changed in several aspects. The insurance-based protection has been reformed through the reorganization of institutions involved in the provision of social protection. Also, the system of social assistance has changed several times from the beginning of the transition process, and has shifted from a system of so called self-governing interest bodies to public services institutions. The first revision of legislation, i.e. the Law on Social and Child Protection took place in 1991, while the new Law on Social and Child Protection was adopted in 1994. Basic changes in these laws were related to the availability of social benefits. Most specifically, the number of social benefit users prior to 1991 was much lower,25 and with the law it significantly increased.26 According to the 1994 Law, child allowance was defined as a universal benefit for the first three children (whilst prior to this, availability of this benefit was decided by households’ income levels), and family material support as such has been defined. With the change in the Law in 1994, the number of child allowance beneficiaries has increased to about 130,000, and reached a maximum number of about 150.000 beneficiaries in 1999. The benefit amount was set, based on the age of the recipient and increased with age. In 2001, the existing Law on Social and Child Protection was amended. Basic changes incorporated in the law related to the availability of child allowances, as well as the availability of family material support. These changes linked child allowances to family status and the health conditions of children, whilst only children in MOP beneficiary households and children who had been disturbed during their development could receive this benefit. With the reform of the law, the number of child allowance beneficiaries reduced from 145,000 in September 2001 to approximately 13,000 children in October 2001. On the other hand, the right to receive benefit from the MOP has broadened and now includes persons able to work with dependent children. Another revision to the legislation followed in 2005. Basic changes to the Law on Social and Child Protection were related to the monetary size of social benefits, as well as to changes in the availability of some of the provided benefits. The MOP sum was determined by the law and specified that the amount would be increased according to the 25 26

Data on the number of beneficiaries for that benefit, similar to FMS do not exist Information received from interview with MHLSW.

39

funding capacity of the central budget. Previously the MOP benefit was adjusted quarterly in accordance with the growth in wages. In addition to this,, the carers’ allowance eligibility became limited to those individuals who received MOP. A personal disability benefit was also introduced. Like with social assistance, insurance-based protection changed, including the Fund for Pension and Disability Insurance (in charged for pension and invalid insurance), the Employment Agency (in charge of unemployment insurance) and the Health Insurance Fund (in charged of health insurance) having been established in the 90s as the state fund providing social protection. The Law on Employment regulating unemployment insurance was revised in 2000. According to the new law, a private agency could intermediate in the process of employment; however, the provision of social protection services remained strictly in the jurisdiction of the Employment Agency. Also, over the last couple of years the Employment Agency has initiated and introduced various active labour market measures to the Montenegrin labour market – training, retraining and providing incentives for self-employment through loans for self-employment. The Law on Pension and Invalid Insurance has also changed several times. The most important change in legislative regulations in this area occurred in 2003. With the passing of a new Law on Pension and Invalid Insurance, a pension system reform started that was based on inter-generation solidarity towards a three pillar system, including generational solidarity, compulsory insurance and voluntary private insurance. The Law on Voluntary Pension Insurance was passed in 2006, while the date of the introduction of the second pillar (mandatory private pension insurance) is still unknown. In 2007 the Ministry of Health, Labour and Social Welfare adopted the Strategy for Social and Child protection, determining the principles of system reform. According to the strategy, there are several reasons for reform, or several identified inadequacies of the system, which are: •

The system of social and child protection is centralized, bureaucratic and inelastic. The procedures for exercising rights are complicated and long;

•

inclusion in the system is low in relation to needs;

•

the network of social services is insufficiently developed and mainly targeted at financial benefits and institutional care;

•

there is a low level of inclusion of the non-governmental sector in the provision of services, while cooperation between government and non-government sectors in the provision of social services remains undeveloped;

•

the system of social and child protection is not in line with international standards and the commitments that Montenegro has agreed to.

The planned reforms of the social protection system include the decentralization of the system and a higher level of inclusion of local authorities in the provision of services, 40

synchronization with international standards, a higher level participation of citizens, and a better quality and better efficiency of social protection benefits. 2.6.

Key Challenges of the SP System in Montenegro

Social protection spending in Montenegro makes up around 18% of the GDP. Compared with EU member states and especially new member states, the level of social protection spending in Montenegro is not high, i.e. Montenegro falls into the category of countries with mid-level social protection expenditures. There is a wide range of benefits provided to households, whilst the system faces many challenges relating to adequacy, targeting, and transparency of the system. The key challenges of the social protection system in Montenegro are as follows:. - Improving Targeting of Social Protection, and Especially Social Assistance Benefits. The criteria for social welfare benefits are quite rigid, especially in the case of family social assistance (MOP benefit), and leaves out many poor households. On the other hand, there is a problem of misuse of social benefits by its administrators and professionals, as well as by its beneficiaries. This requires a change in the social protection system and a completely different design for the system. The system needs improvements both in its coverage and in the monetary amounts of benefits, as well as in the authorization of their issuance and delivery. - Adequacy of Social Assistance Benefits. Social assistance benefits in their current amounts are not sufficient to satisfy the basic needs of one individual, let alone entire households. The MOP benefits compensation is roughly 40% of the per capita poverty line for single-member families whilst in the case of five- or more- member families, MOP compensation is less than one quarter of the per capita poverty line. - Lack of Transparency. This issue can be observed at all levels of social policymaking – design, implementation and supervision. Social policy reforms have been prepared and decided with support and conditionality imposed on them by international financial organizations, where only fiscal needs and capabilities have been considered. The social services and social benefits provisions also need more transparency; so that different client groups can more effectively use the services and benefit from the system. - Human Resources in the Social Sector are Insufficient. Despite regulation, out of ten CSWs, only two of them have the required professional staff, and in many cases the staff are more involved in the provision of benefits than in delivering social services. With the planned decentralization process, the recruitment of staff should be considered more carefully. - The Demographic, Social and Financial Sustainability of the Social Protection System. According to demographic data, Montenegro’s population is ageing, there is a greater demand for social welfare, there is an increased number of social financial assistance recipients as well as an increased demand for social services. This requires reforms of the system in such a way as to meet the current and expected needs of the society.

41

2.7.

References for the Chapter 2

1. European Commission – Social Protection in 13 candidate countries – a comparative analysis, 2003 2. European Commission – Social Inclusion in Europe 2006, Brussels 2006 European Industrial Relations Observatory http://www.eiro.eurofound.eu.int/2005/03/study/tn0503102s.html 3. ISSP- Household Budget Survey, Podgorica,Issues 1-13 2002-2004. 4. ISSP – Montenegro Economic Trends, issues 8-25, 2000-2006, Podgorica 5. ISSP – Omnibus Survey – Podgorica, Decembar 2005. 6. ISSP - Public Social Assistance and the Poor -Coverage and Effectiveness, Policy paper, ISSP, 2006. 7. ISSP/ Ministry of Labor and Social Affaires– National Strategy for Resolving Issues of Refugees and Internally Displaced Persons, ISSP 2005 8. ISSP/UNDP – Human Development Report for Montenegro – Managing Diversities, UNDP 2005 9. ISSP/UNDP- Household Survey of RAE, refugees and IDP’s, 2003, ISSP 10. ISSP – Living Standards and Poverty in Montenegro, ISSP, 2003 11. Ministry of Health, Labour and Social Welfare – Strategy for Social and Child Protection 2008 -2012, 2007 11. Ministry of Health, Labour and Social Welfare – Strategy for Social and Child Protection 2008 -2012, 2007 11. MONSTAT – Statistical Year Book, 2000, 2004,2005, 2006, MONSTAT 2000-2007

42

12. MONSTAT – Monthly Statistical Review, issues from 2005, 2006 and 2007, MONSTAT 13. Institute of Economic Zagreb – Social Protection and Social Inclusion in Croatia, May 2006

43

2.8.

Statistical Annex for the Chapter 2

Table 2.1: Overview of social assistance benefits Program

Type of benefit

Eligibility

Funding

Family material support (MOP)

Monthly benefit for family, ranging from €55 to €105, depending on the number of family members Monthly benefit, €50

Income and assets tests (income cannot be higher than the amount set by the MOP amount for specified family size) Persons who become disabled before 18 years of age

State budget

Carer’s Allowance

Monthly benefit, 50€

State budget

Residential institutional care

Covers the cost of accommodations in special institutions

MOP beneficiaries, who due to chronic illness require constant nursing care and recipients of personal disability benefits Children developmentally delayed or without parents, adult persons with disabilities

Accommodation in foster family

Covers the cost of accommodations plus foster family compensation Includes the cost of accommodations in a residential institution and the cost of transport Paid health insurance

Personal disability benefit

Assistance for professional rehabilitation and job training Health protection

Children without parents or developmentally delayed, adult persons with disabilities Children and youth with special needs

State budget

State budget or users if they sign contract with institution State budget

State budget

Implementing agency Ministry of Health, Labour and Social Welfare, Centres for Social Work Ministry of Health, Labour and Social Welfare Ministry of Health, Labour and Social Welfare Ministry of Health, Labour and Social Welfare

Ministry of Health, Labour and Social Welfare Ministry of Health, Labour and Social Welfare

MOP recipients, personal disability recipients and persons in residential or foster family accommodations

State budget

Ministry of Health, Labour and Social Welfare

Funeral costs

Covers funeral cost in the amount of 300€

MOP recipients, personal disability recipients and persons in residential or foster family accommodations

State budget

Ministry of Health, Labour and Social Welfare

One time cash assistance

Benefit provided to the family of individuals in extreme social need

State budget

Ministry of Health, Labour and Social Welfare

Birth allowance

Benefit in the amount of 100€ for every newborn

State budget

Child allowance

Monthly benefit amounting from €15 to €25

Ministry of Health, Labour and Social Welfare Ministry of Health, Labour and Social Welfare

Compensation for unemployed mothers and full time students Compensation of salary for parttime work

Monthly benefit of 25€, paid for one calendar year

Family or individual which is in extreme need due to problem related to accommodations, health or material needs Universal benefit, parents have a right to this benefit for each newborn First three children in an MOP beneficiary family, children with severe disabilities, who can on cannot be enabled to independent life and children without parents Unemployed mothers and mothers who are full-time students

State budget

Ministry of Health, Labour and Social Welfare

Parents that need to provide care for a sick child

State budget

Ministry of Health, Labour and Social Welfare

Children of MOP recipients and children in foster families

State budget

Ministry of Health, Labour and Social Welfare

Holiday and recreation of children

Benefit for parents; employer pays a full-time wage to parent and can request reimbursement from the Ministry Covers the cost of children’s holidays and recreation

State budget

Source: Law on Social and Child Protection, 2005

44

Table 2.2. Staff Profile of the CSWs and SSWs (2004)

CSW/SSW

Social Specialist Computer Administrative worker Psychologist Pedagogue Sociologist Defectologist Lawyer paediatrician Economist analyst assistant Driver

Janitor

Other

Total

17

2

2

3

0

13

1

1

5

26

2

0

3

75

SSW Cetinje

1

0

0

1

0

1

0

0

0

6

0

0

0

9

SSWDanilovgrad

1

0

0

0

0

1

0

0

0

2

0

0

0

4

CSW Podgorica

SSWKolasin

2

0

0

1

0

1

0

0

0

2

0

0

1

7

CSW Niksic

8

1

1

3

0

5

0

2

3

8

1

0

3

35

SSW Pluzine

1

0

0

0

0

0

0

0

0

2

0

0

0

3

SSW Savnik

0

0

0

1

0

0

0

1

0

1

0

0

0

3

CSW Bar

4

0

0

0

0

2

2

1

0

3

1

0

2

15

SSW Ulcinj

2

0

0

2

0

0

0

1

0

1

0

0

0

6

CSW Kotor

4

0

0

0

0

0

1

1

1

1

1

0

0

9

SSW Tivat

2

0

0

0

0

0

0

1

0

0

0

0

0

3

SSW Budva

1

0

0

0

0

0

0

0

0

0

0

0

0

1

CSW Herceg-Novi

1

1

0

0

0

2

0

1

0

1

1

0

0

7

CSW Berane

4

1

1

1

0

2

1

3

1

3

1

0

7

25

SSW Andrijevica

2

0

0

0

0

1

0

0

0

0

0

0

0

3

CSW Plav

2

0

1

2

0

2

0

0

1

2

1

1

0

12

CSW Rozaje

2

1

1

0

0

1

0

1

1

3

0

0

1

11

CSW Bijelo Polje

5

1

0

2

0

2

1

1

0

9

1

1

1

24

SSW Mojkovac

2

0

0

0

1

1

0

0

0

1

1

0

1

7

CSW Pljevlja

3

0

0

4

1

2

1

0

0

4

1

1

0

17

SSW Zabljak TOTAL

1

0

0

0

0

0

0

0

0

1

0

0

1

3

65

7

6

20

2

36

7

14

12

76

11

3

20

279

Source: Ministry of Health, Labour and Social Welfare

45

Table 2.3: Number of users of maternity leave compensation (December 2007) Mothers (employed Mothers (employed in state sector) in private sector) 2000 Total Northern region Central region Southern region

996 184 596 216

Total Northern region Central region Southern region

428 72 227 129

Total Northern region Central region Southern region

Total

535 160 215 160

1531 344 811 376

759 188 371 200

1187 260 598 329

59

1099

1158

7 30 22

237 521 341

244 551 363

2004

2007

Source: Ministry of Health, Labour and Social Welfare

Table 2.4: Family material support (December)

Number of families Total Northern region Central region Southern region

7,936 3,254 3,676 1,006

Total Northern region Central region Southern region

10,733 4,925 4,610 1,198

Total Northern region Central region Southern region

12,741 6,044 5,429 1,268

Average Number of per Average per Average family family in family household members € member in € size 2000 16,022 45.67 22.62 2.0 6,094 45.67 22.62 1.9 7,996 44.61 23.82 2.2 1,932 46.8 21.52 1.9 2004 31,721 64.61 21.86 2.9 13,829 62.31 22.19 2.8 14,804 68.18 21.23 3.2 3,088 60.37 23.42 2.6 2007 39,281 76.74 24.89 3.1 18,408 75.89 24.92 3 17,533 79.04 24.47 3.2 3,340 70.97 26.94 2.6

Source: Ministry of Health, Labour and Social Welfare

Table 2.5: Number of personal disability benefit users (December) Northern region Central region Southern region Total

2007

2006

539 492 268 1.299

515 421 242 1.178

Source: Ministry of Health, Labour and Social Welfare

Table 2.6. Number of users and average amount of carer’s allowance (December) Other persons care Number of users Total monthly amount

Municipality

2000 4,763 2,484 1,456 823 2004 5,097 2,508 1,559 1,030 2007 5,376 2,542 1,878 956

Total Northern region Central region Southern region Total Northern region Central region Southern region Total Northern region Central region Southern region

245,931.36 127,389.80 75,841.96 42,699.60 239,670.00 118,420.00 73,130.00 48,120.00 311,441.92 130,233.70 121,972.70 59,235.52

Source: Ministry of Health, Labour and Social Welfare

Table 2.7: Average number of child benefits users (December 2007) Municipality

Number of Child Total monthly amount of allowance beneficiaries Child allowance in €

Birth grant

2000 Total Northern region Central region Southern region Institutions

680 272 297 111

150,248 49,017 68,698 32,533

800,591.26 258,611.43 372,011.42 169,968.40

14,241 5,818 6,912 1,511

284,820.00 116,360.00 138,240.00 30,220.00

2004

Total Northern region Central region Southern region

585 201 276 108

Institutions 2007 Total Northern region Central region Southern region Institutions

545

18,524

159 265 121

8,129 8,609 1,662

315,849.00 138,441.50 148,307.50 29,100.00

-

124

3,437.50

Source: Ministry of Health, Labour and Social Welfare

47

Figure 2.1: Expenditures for child allowances and number of users in the period 2000-2007

12. 000

160000 140000

10. 000

120000 in euro mn.

8. 000

100000

6. 000

80000 60000

4. 000

40000 2. 000

20000

0. 000

0 2000

2001

2002

2003

2004

Expenditures on child allowances

2005 Number of users

Source: Budget Laws for period from 2000-2007

Note: In October 2001 eligibility for child allowances has changed, which caused a decrease in the number of users. however, in this Figure we have used the number of recipients in October 2001 as representative for the whole year.

48

Table 2.8: Overview of eligibility and amount of main benefits Conditions I group II group

1.Personal disability benefit

2. Supplement for Carer’s Allowance 3.Orthopedic supplement 4.Family disability benefit and increased family disability benefit

5.Family material support

In the case that family members are users then

6. Family allowance

100%

Amount in € monthly 307.00

73%

224.11

% of base

III group

55%

168.85

IV group

41%

125.87

V group

29%

89.03

VI group

18%

55.26

VII group

13%

39.91

VIII group

8%

24.56

IX group

7%

21.49

X group

6%

18.42

Depending on the degree of disability

50%

153.50

Depending on disability

25%

76.75

In general If the beneficiary is member of diseased veteran If there is more members who have right on disability benefit In general Users of family disability support have increase for each member by 20%

10%

30.70

60%

184.20

50%

153.50

20%

61.40

20%

12.28

One member family

70%

42.98

Two members

80%

49.12

Three members

90%

55.26

Four and more members Users of family disability support who earn this right after death of veteran-user of Carer’s Allowance Single user of MOP who need care of other person +50%

100%

61.40

85%

130.48

50%

65.24

7.Health protection and other right Users that are not insured otherwise in the area of health protection Veteran and civilian disabled have right on this 8.Orthopedic and other apparatus according to the health insurance law Veteran and civilian disabled have right on this 9.Spa and climate treatments according to the health insurance law Free cost in the internal transport when visiting 10. Free and subsidized transport practitioners, and discount in other cases In the case that user of some of these rights 11. Funeral costs dies his family has a right on funeral cost

Source: Law on Veterans and Disability Protection

49

Table 2.9: Other social benefits users (December 2007) Coverage of cost in the institutions outside of Montenegro Municipality

Cost of food in the kindergartens

Subsidized public transport

Health protection for disabled persons

Number of users

Average amount

Number of users

Number of users

Number of users

Danilovgrad

20 43 16

261.49 217.14 301.16

162 489 33

284 227 66

890 747 257

Total

79

245.38

684

577

1,894

Podgorica Cetinje

Source: Ministry of Health, Labour and Social Welfare

Table 2.10: Public expenditures on social protection in Montenegro (as % of GDP ) 2000

2001

2002

2003

2004

2005

2006

2007

% of GDP 1.Social protection benefits and allowances

17.00

16.99

18.04

18.21

16.97

15.55

15.67

15.80

1.1.Contributory benefits

15.10

15.71

16.85

16.84

15.59

14.25

14.52

14.57

1.1.1. Gross pensions

8.97

9.20

9.38

9.44

8.77

8.12

8.74

9.34

1.1.2. Maternity leaves

0.39

0.36

0.32

0.39

0.36

0.34

0.31

0.26

1.1.3. Passive labour market measures

0.07

0.04

0.07

n.a.

0.09

0.19

0.25

0.23

1.1.4. Public health expenditures

5.68

6.11

7.08

7.01

6.37

5.59

5.22

4.74

1.23

1.2. Social assistance benefits

1.90

1.28

1.19

1.36

1.38

1.30

1.15

1.2.1. Child allowances

1.05

0.49

0.12

0.17

0.16

0.15

0.15

0.16

1.2.2. MOP

0.43

0.44

0.77

0.64

0.50

0.50

0.48

0.53

1.2.3. Other persons care

0.12

0.11

0.07

0.19

0.14

0.14

0.15

0.19

1.2.4. Veterans and invalid protection

0.23

0.17

0.17

0.26

0.50

0.42

0.35

0.34

1.2.5. Single payments and subsidized public transport for disabled persons

0.03

0.04

0.03

0.06

0.05

0.06

0.00

0.00

1.2.6. Food in the kindergartens 2. Social care, services and measures 2.1. Accommodation in residential institutions 2.2. Active labour market measures 2.3. Recreation of children from the poorest families 3. Other social protection activities 3.1. Ministry of Health, Labour and Social Welfare

0.03

0.03

0.03

0.04

0.03

0.03

0.02

0.02

0.63

0.60

0.62

0.20

0.39

0.67

0.88

0.52

0.15

0.14

0.16

0.18

0.15

0.14

0.11

0.10

0.44

0.43

0.44

n.a.

0.22

0.51

0.76

0.42

0.03

0.03

0.02

0.02

0.02

0.01

0.00

0.00

3.56

2.19

3.10

2.50

2.16

2.56

1.15

1.13 0.13

0.06

0.14

0.13

0.10

0.08

0.08

0.18

3.2. Ministry of Health

0.07

0.06

0.09

0.07

0.07

0.07

0.07

3.3. Other Health Institutions

0.00

0.00

0.00

0.00

0.00

0.36

0.05

3.4. Centres for Social Work

0.11

0.10

0.16

0.17

0.19

0.15

0.14

0.15

3.5. Commissariat for Displaced Persons

0.01

0.01

0.00

0.00

0.01

0.01

0.01

0.01

3.6. Red Cross

0.01

0.01

0.00

0.00

0.00

0.01

0.01

0.01

3.7. Employment Agency of Montenegro

0.34

0.39

0.39

0.00

0.38

0.35

0.34

0.47

2.96

1.48

2.33

2.15

1.43

1.54

0.37

0.27

21.19

19.77

21.75

20.90

19.52

18.78

17.70

17.44

3.8. PIO Fund 4. Overall spending on SP in Montenegro (1+2+3)

Source: Ministry of Finance, Budget Law for period from 2000 to 2007

50

0.09

3. 3.1.

Chapter 3. Poverty and Social Exclusion National Definition of Poverty

According to the newest available data, the absolute poverty line for 2006 is 144.68€ per equivalent adult person per month. As this data is calculated and published by MONSTAT, the official statistical institution, it should be considered as the new benchmark for regularly monitoring poverty in Montenegro.27 However, it is important to emphasize that a direct comparison of results between MONSTAT poverty estimates that will be presented in this report and previous poverty estimates is not possible due to different data sources and methodologies. Box 3.1: Methodology of the MONSTAT Poverty Analysis Five major elements underlie the methodology for deriving the poverty estimates presented in this study: (i) construction of the appropriate consumption aggregate from the HBS data sets, which are then used as the main welfare measures; (ii) adjustments for differences in household composition, (iii) adjustments to differences in costs faced by households; (iv) construction of the absolute poverty line based on data from the 2006 HBS, and finally (v) use of this poverty line in conjunction with welfare measures derived from the 2005 and 2006 HBS data sets to estimate the incidence, depth, and profile of poverty in the country. The material well-being of the population is measured by household equivalent consumption. The consumption aggregate provides a good measure of household well-being, and is calculated as the sum of household expenditure on various food and non-food items consumed in the current period. It also includes personal consumption of home-produced goods; estimated value of gifts received in kind; and imputed housing rents (i.e. the self-estimated rental value of the owner-occupied dwellings). Expenditures on the purchase of large durable goods are not included in the consumption aggregate because they are not consistently related to the well-being of households. The modified OECD scale has been adopted to adjust differences in household sizes and composition and to calculate the equivalent household consumption. Accordingly, the equivalent size of household is calculated as the weighted sum of household members, where the first adult person in the household counts as 1 unit, any other adults count as 0.5 units each, and each child under age of 14 counts as 0.3 units. Household consumption has been adjusted for differences in prices over time and according tp space. Specific price indexes have been derived for each year 27

Strategy for Alleviation of Poverty and Social Exclusion 2007, uses as official poverty line the one which is determined based on the ISSP Household Survey 2004 data, as these were the available data at the moment of creation of the APSE, according to which, poverty line is set at the level of 116.2€ per person per month.

51

and for three major regions in Montenegro (North, Central and South). Price changes over time are corrected by using the cost-of-living index, while regional price deflators are derived from price information collected by the HBS. The modified OECD scale has been adopted to adjust differences in household sizes and composition and to calculate the equivalent household consumption. Accordingly, the equivalent size of household is calculated as the weighted sum of household members, where the first adult person in the household counts as 1 unit, any other adults count as 0.5 units each, and each child under age of 14 counts as 0.3 units. Household consumption has been adjusted for differences in prices over time and according tp space. Specific price indexes have been derived for each year and for three major regions in Montenegro (North, Central and South). Price changes over time are corrected by using the cost-of-living index, while regional price deflators are derived from price information collected by the HBS. The poverty line is constructed in accordance with the cost-of-basic-needs method and it consists of two major components: (a) the food poverty line (i.e. cost of the minimum food basket), and (b) a corresponding allowance for basic nonfood goods. Both components summed together give the total poverty line. The minimum food basket is chosen so as to satisfy basic nutritional requirements for the population in this part of the world, as suggested by the FAO (2004), while the composition of the minimum food basket reflects the actual diet of the population. The nutritional norm of 2288 kcal/day/reference person is applied.28 The cost of the minimum food basket is calculated by multiplying the quantities from the minimum food basket with appropriate prices. The cost of the minimum food basket is estimated at €37.28 per month per nutritional equivalent adult, expressed in 2006 prices. Based on the cost of the minimum food basket, the total poverty line is estimated by a linear regression model, the same method that has been applied in other regional countries (Luttmer; 2000; and Bogićević et al, 2003) and is well-accepted internationally. Besides the aforementioned poverty line, there are several more indicators in Montenegro that could be considered as types of poverty measures. Namely, as mentioned in the previous chapters, the key social assistance transfer, family material support (MOP) is considered to be the only transfer directly targeted at poor families. An official poverty line could be approximately expressed in monetary terms, i.e. the MOP eligibility criteria could be translated into monetary values. Firstly, in the MOP eligibility criteria, the income limit for a single member family is 50€, this amount is amended by 20% for additional members for a two and three member family, whilst for a family of four and five members it is increased by 18%. (The amount of MOP benefit is determined in the same way.) Besides the income limit, there are 28

The same norm was used in the previous poverty study for Montenegro (Radević and Beegle, 2002), as well as in poverty studies for Serbia (Bogićević et al., 2003; Krstic, et al. 2007).

52

conditions related to ownership of accommodation and land, which could be translated into monetary amounts: ownership of accommodation through rent and ownership of land into estimated income from the land. The rent amount is estimated based on the ISSP household survey data ranging from €120 for a one-room apartment to €200 for a three-room apartment. Estimated income from land is set at 20€ per month, assuming that households could produce 240€ worth of agricultural products (potatoes, tomatoes, onions, carrots, fruits, etc) since the minimum size of land is 2000 sq meters. Using these calculations, the official poverty line ranges from 200€ per capita for a single member family to 63€ per capita for a five or more member family. Please look at the Annex, table 3.1. In addition, MONSTAT published the value of the food poverty line, i.e. the cost of the food basket for a four member family. The food basket has 65 food products in quantities which satisfy the average needs of a four member family. The average quantities of food products are prescribed by nutritionists. However, the quantities used in the current MONSTAT food basket were defined, almost 20 years ago. MONSTAT calculates the monthly value of the food basket which according to the last available data for December 2007 is worth 299.12 Euros. The Trade Union of Montenegro also calculates the value of a consumer basket for a four member family. This basket covers monthly costs for food, residence, transport, major hygienic products, clothing, education and culture. According to the last available data, for November 2007, the value of this basket was 719 Euros. In these average consumption figures, the major categories are food (45.14% of total costs), shelter (22.35%), clothing (10.63%). The concept of social inclusion is relatively new for Montenegro and for the first time has been incorporated into an official document in the Strategy for the Alleviation of Poverty and Social Exclusion 2007. The concept of social exclusion is understood and described as the inability to access certain services such as social protection, health care or education. This concept connects material and socio-psychological aspects with living standards. In accordance with this, the strategy proposes measures to target social policies for the vulnerable population, as poverty would not lead to the marginalization and limited social participation of these groups. 3.2.

Poverty Data and Profile

The poverty profile in Montenegro will be presented using MONSTAT data for 2005 and 2006, as the most recent. 29 According to this data and aforementioned poverty line, set at a level of 144.68€ per equivalent adult person per month, 11,3% of the Montenegrin population, or 71,000 citizens, were defined as poor in the years 2005 and 2006. Also, the wider poverty line is defined by the level of the absolute poverty line, plus 25%, in order to identify the vulnerable population. It includes, in addition to the poor population, citizens who are 29

Methodology according to which data is collected and calculated is explained in Box 3.1.

53

at high risk of poverty. This poverty line is set at a level of 180.85€ per month, and according to figures in 2005, the poverty rate was 25.3%, whilsr in 2006 it was 23.6%. The poverty rate remained the same between 2005 and 2006, whilst other indicators showed slight signs of improvement in the situation regarding the poor population. (Table 3.1 and 3.3) The poverty gap was 2.1% in 2005 and 1.9% in 2006, which means that the difference between the consumption of the poor and the absolute poverty line decreased during the observed period. The share of the lowest decile (the poorest 10%) in total slightly increased from 4.2% to 4.3%, whilst the share of the highest decile (the richest 10%) decreased from 21.6% to 20.2%. The Gini coefficient for the distribution of equivalent consumption decreased from 0.26 in 2005 to 0.24 in 2006. (Table 3.2.) The consumption structure of the poor population shows that almost half of their budget is spent on food. In addition, the poor spend much less than the non-poor on health and education. Work is the most important revenue source for the poor population. Revenue from salaries together with revenue from own business and agriculture makes up 51% of the total revenue of the poor. However, a significant share of revenue comes from social benefits (12.9% of total revenues) and remittances from abroad (16.3% of total revenues). The relative importance of pensions regarding total income is similar among the poor and the non-poor, although the non-poor get a slightly higher proportion, 22%, compared with 18.2% amongst the poor. Data shows that part of the poor population has a nutrition deficit. The average nutritional value of food in Montenegro is 2971 calories per nutritional equivalent for an adult person per day. For the poor population, the average calorific value is 2158 kcal, which is below the nutritional norm of 2288 kcal per day. Also, the poor take their main source of energy from bread and cereals (45%), much higher than the non-poor. The poor live in bad conditions, around 36% of them in apartments below 10 square meters, and have limited access to public services. The poor live in areas which are much further away from hospitals, primary and secondary schools than the non poor. The poverty profile based on 2005 and 2006 MONSTAT data shows that some population groups are hardly impacted by poverty whilst others face a considerably higher-than-average risk of poverty. The size of the family, number of children, education and employment status of the household head, as well as the place they live, all impact on the poverty risk of Montenegrin households. Large households are more likely to be poor. More than 70 percent of the poor live in households with five and more members. Poverty rates for households with five and more members are above the national average. For example, amongst individuals living in households with seven or more members, the poverty rate is 35.6 percent. The poverty risk, calculated as the ratio of the poverty rate of that subgroup to the overall

54

poverty rate, is 3 times higher for members of the largest households (7 and more members) than for an average person (Table 3.4). Families with 3 and more children are more likely to be poor. Data shows that among these households the poverty risk is twice the national average (Table 3.5). The survey showed that the age of the household head is not significantly correlated with poverty. It is true that the largest share of the poor (35%), comes from households headed by a person of 45-54 years of age. Also, households with younger heads are somewhat less likely to be poor, but these observed differences are relatively small. Gender of the household head seems connected with the poverty risk as femaleheaded households are less likely to be poor. However, male-headed households are typically larger which might explain the observed difference in poverty risk between female- and male-headed households (Table 3.5) On the other side, the activity status of the household head has a significant impact on the poverty status of the household. Thus, data shows that the risk is lowest for those headed by employees (poverty rate 7%) and highest for those headed by unemployed or inactive persons (26% and 29% respectively). Self-employment of the head (e.g. engagement in subsistence agriculture or running a small business) is associated with a poverty risk of 60% above the national average. It is interesting to note that the incidence of poverty among households headed by a retired person is below the average, in spite of the fact that individual pensions are relatively low compared to wages. This can be explained by the fact that pensioners are more often heads of smaller families or larger multigenerational households in which the pension is only one source of the household income. (Table 3.7 ) Also, the education of the household head strongly influences the poverty status. Individuals living in households headed by a person with primary or lower education face the highest poverty risk, around 77 percent above the overall national average. Higher education of the household head reduces the poverty risk significantly, to 15 percent of the national average. (Table 3.6 ) Rural populations face twice as high a risk of poverty than the urban population. Also, poverty in rural areas is also more deep and severe than poverty in urban areas. The poverty gap index for rural areas is more than double the average urban area gap. Data shows that around 60% of all poor individuals in Montenegro live in rural areas. There is a substantial difference in the extent of poverty between the North and in other parts of the country. Poverty risk in the North is 1.5 times the national average and more than twice the level of poverty risk in the Southern and Central regions. Also, one-half of Montenegro’s total poor live in the North, even though this region accounts for less than a third of the country’s total population. Observed differences are caused by the region itself (i.e. natural resource endowments, presence of infrastructure, institutional framework) but also can be caused by other factors (such as differences in educational levels, employment rates etc). (Table 3.8 )

55

3.3.

Poverty Indicators and Laeken Indicators of Social Exclusion

From the previous analysis, it could be noted that the first surveys on poverty were conducted by independent research institutions and international organizations. However, as the new strategy planned, MONSTAT took over the research on poverty. The data presented on poverty for 2005 and 2006, as well as current work on the preparation of poverty estimates for Montenegro, based on the 2007 HBS data, present results of the most recent MONSTAT work in this area. In order to continue to conduct and improve HBS as well as to develop other research, MONSTAT is constantly working on capacity building, the improvement of methodology and questionnaires as well as data processing procedures. The Population and Housing Census (PHC) conducted in November 2003 provided the country with a much needed updated sampling frame, which is one of the building blocks for the household budget but is also important for other surveys. However, in order to create an overall realizable base for social policy monitoring and redesign, some of the gaps need to be filled in. First of all, the overall analysis of poverty in Montenegro would require an improved, comprehensive household budget survey, in addition to the implementation of the Living Standard Measurement Survey. This type of survey has primarily been created to collect data needed to monitor health system reform but can also be used for monitoring the implementation of the APSE, and is currently conducted by an independent research agency with the support of the World Bank. However, the goal of the project is to provide technical assistance to the MHLSW and to build the capacity of Institute for Public Health and MONSTAT alongside implementation the LSMS survey. In addition, Laeken indicators have still not been calculated in Montenegro. Also, the calculation of these indicators have been planned according to the newly adopted strategy. According to the plans, at the beginning, the main indicators of poverty would be based on expenditure and net income, due to the still significant presence of the undeclared work in Montenegro (around 15% of the GDP according to the last estimates). As expected, it is planned that indicators will be developed, calculated and monitored continuously by MONSTAT. However, there is still no information about any concrete steps forward in this area. 3.4.

Vulnerable Groups

The most vulnerable categories regarding poverty and social exclusion in Montenegro are identified as follows: the Roma population group, refugees and displaced persons, but also people with disabilities, the elderly and children. All of the abovementioned population groups are defined as vulnerable by the Government, in official documents, primarily in the Strategy for the Alleviation of Poverty and Social Exclusion 2007 and in the Action Plan for its implementation. Roma, IDPs and refugees are defined as vulnerable groups based on conducted surveys

56

which showed that these groups are more likely to be poor than the rest of the domiciled population. In addition, the Strategy for the Alleviation of Poverty and Social Exclusion 2007, states: “It is important to mention that documents, which are in the process of preparation and which are recognized in the Action Plan, are important for the alleviation of poverty and social exclusion and as such will be included in any further implementation of the strategy. These documents are, the Strategy for Social and Child Protection, the Strategy for the Inclusion of People with Disabilities and the Strategy for the Protection of the Elderly in Montenegro.” Roma, Ashkaelia and Egyptians (RAE) population group According to the data from the last census (2003), 0.42 % of the population in Montenegro is of Roma nationality while 0.04% declared themselves to be Egyptian.30 However, the real number of RAE in Montenegro is much higher because of the following: the RAE are not interested in enrolment, they frequently change their place of residence within the territory of Montenegro, they easily adapt to the conditions of their surroundings, and most RAE declare themselves as Muslims or Montenegrins. It is estimated that approximately 20,000 RAE live in Montenegro, since a large number have immigrated from Kosovo to Montenegro during the war (NATO bombings). The poverty rate is highest among the RAE population group. According to the UNDP31, 27% of Roma live in households with daily equalized expenditures below PPP $2.15 or $4.15. The ISSP/UNDP Household Survey (2003) showed that 52.3% of these individuals are considered to be poor, while 75.6% are economically vulnerable. In addition one third of the entire population lives in households with total expenditure below the value of minimum food basket. The status of this population is characterized by low income, bad living conditions, low literacy level as well as specific health issues. These households mainly live in suburban areas in accommodation which does not have water and basic furniture. Unemployment is very high (among the respondents, just 10.8% reported employment in the week prior to taking the survey). A significant share of these individuals earn a living by collecting various types of garbage and by selling things or begging for income. On the other side, those who are employed, due to low education, work in low income sectors such as communal services, repairs, agriculture etc. The RAE population is not significantly more “health poor” than other populations as could be expected based on their living conditions. Regarding the health status of the RAE population, it is important to note that the majority of this population has medical insurance. According to the survey results, out of the total number of respondents who visited a doctor, 82% were covered for medical services by their health insurance. 30 31

Roma program of the Open Society Institute “At Risk: Roma and the Displaced in Southeast Europe”, UNDP (2006)

57

However, 2.3% of respondents declared that they did not ask for medical help as they could not afford it or they were not in the position to do so. Another significant aspect is the health of women who get married and deliver babies very young. According to the findings of all organizations whose work is focused on the RAE, education is one of the key problems with this population in Montenegro. The RAE population is characterized by a very high level of poor education, i.e. 70% of this population age 16 to 24 do not attend school. According to existing unofficial projections, almost 80 % of the RAE is illiterate, which presents the most significant problem for children and the young as they can not become part of the education system. Two main reasons why schools age children do not go to school are lack of material resources and lack of motivation. Due to all the previously mentioned reasons, the RAE population is one of the most significantly socially excluded population groups. Realizing this, the Government of Montenegro, adopted an Action plan in 2005 for the “Decade of Roma inclusion 20052015”. In addition to this, the Strategy for Improvement of the Status of the RAE Population in Montenegro 2008-2012, was adopted as a Government in 2007. The strategy provides planned steps for the Government related to all the main issues regarding RAE status in Montenegro, such as legal status, education, health, living conditions, political participation etc. Refugees from Bosnia and Croatia Poverty among refugees and displaced persons is approximately 40%, whilst 68% of refugees and 73% of IDPs are considered as economically vulnerable. Also, 17% of refugees and 15.3% of IDPs are living in households with total expenditure levels below the value of the minimum food basket. According to UNHCR data for the end of 2006, there were 6.926 refugees and 16.196 IDPs in Montenegro. The last census amongst this population was conducted in 2004, and together with the data from ISSP HHS of RAE, Refugees and IDPs, it presents the most reliable and accurate source for the analysis of the status of this population. Refugees are mainly concentrated in the southern part of Montenegro. Out of the total refugee population 14.2% are permanently employed, 21% are temporary employed while 14.7% are pensioners (others are supported or unemployed). The employed are mainly working in sectors such as trade, crafts, catering and education. The fact that this situation is not so problematic regarding employment is due to the fact that the refugee population in Montenegro is characterized by a high level of education. The employment status of this population was resolved by the GoM decree,,in the same way as was the employment status of any migrant trying to find a job in Montenegro. However, more then two thirds of refugees believe that there is no discrimination towards refugees in terms of employment32.

32

Survey on attitudes of refugees and IDPs, ARC, September 2004

58

Most refugees have resolved their accommodation issues during their stay in Montenegro. Due to this but also due to the fact that households who did not get the chance to rent or buy accommodation have quickly left Montenegro, and the number of refugees who do own their own apartments has significantly increased during the last decade. Regarding the health status of the refugee population, according to the 2004 census, 26.7% have some health problems. More then half of these individuals are over 60 years old and mainly live in one-member or two-member households. Thus, the most vulnerable group is the elderly refugee population who do not have family members to take care of them. Internally Displaced Persons (IDPs) from Kosovo33 Data regarding the number of IDPs shows a significant decrease (40%) in this population between 1999 to 2003. However, there is no reliable data or explanation of this trend. It is presumed that the number of IDPs did not reply to the census as the humanitarian aid significantly decreased during this period, in addition to the fact that a number of IDPs moved to Serbia as they could be beneficiaries of social and child allowances. More than half of IDP households have 4 or more members, in contrast to the characteristics of refugee households. The primary source of income for nearly half of IDP households is full or part time employment by a household member. Those individuals who work are mainly employed in the trade sector. The majority of IDPs live in rented accommodation or in their own premises.34 Most of these households have basic appliances. Regarding health issues, around 20% of the IDP population is dependent on health help. The education structure of the IDP population is characterized by a low level of elementary education, due to the fact that a significant part of the IDP population is RAE. According to data, almost one quarter of IDPs above 14 years of age do not have elementary education, whilst the same number has finished only elementary school.35. One of the common problems among refugees and IDPs is registration, i.e. possession of ID cards. Without ID, these people cannot use the social, pension, health or education services in the country. The Ministry of Interior registered refugees whilst ID’s for displaced persons were issued by the Commissariat for Refugees and Internally Displaced Persons. These ID’s, have enabled them to get access to health and education. However, even these individuals did not qualify to receive social assistance. 33

Internally Displaced Persons (IDPs) since proclamation of independence in 2006 actually fall in category of refugees since came from other state (Serbia at the time), however in all documents they are still referred as the IDPs, since the status of refugees from all ex-SFRY republics has not been solved in a consistent way. 34 ISSP Household Survey of RAE, Refugees and IDPs, 2003 35 ISSP Household Survey of RAE, Refugees and IDPs, 2003

59

Social assistance was provided to these individuals through the Red Cross of Montenegro and various other humanitarian organizations. People with Disabilities According to World Health Organization (WHO) estimates, 10% of the total Montenegrin population has some kind of disability. Not surprisingly (bearing in mind the situation regarding statistics in other areas) there is also a lack of reliable statistical data about this population group and its characteristics. However, regardless of whether the exact number of people with disabilities is known, it is evident that this population group is one of the most vulnerable and marginalized in Montenegro. Most of the households who have family members with disabilities have a low income. It is estimated that almost 60% of people with disabilities live at or below the poverty line. The main sources of poverty for this population group are a low level of education as well as a low employment rate. In addition, this group has low access to public and other services. Education is one of the most important problems facing this population and one of the causes of their social status. According to the estimation of the WHO, around 10% of children (below 18 years) have some kind of disability. According to estimates and surveys, only 2% to 5% of these children are part of the education system. 36 This low level of participation in the education system is as a consequence of the still inflexible education system, as well as a lack of data and information on children with disabilities. The education of this population, up to now, has been conducted in special educational institutions. The newly introduced system of inclusive education has still not been efficiently implemented in practice due to a lack of educated cadre, physical barriers as well as a continued biased approach towards this population. Currently, there are 4 special education institutions for children and young with disabilities. Some of these institutions are becoming a part of the regular education system, which is positive practice. Participation of children with disabilities in regular schools is carried out with the support of special teams organized by the Bureau for Education. The education of these pupils is based on books used by other children, whilst methods of work are modified to fit the individual needs of the children with disabilities. In the register of the Employment Fund there are 2.740 unemployed individuals with disabilities, which makes up 8% of the total number of unemployed registered by this institution. However, a significant number of the disabled population is not recorded and this is why they are not part of the education system and also why they are not registered with the Employment Fund. The Employment Fund implements different activities related to the education and training of people with disabilities, as well as providing certain incentive measures for the employers of these individuals. However, many employers are still not so willing to have these individuals in their teams. Aprt from the lack of financial resources which could be used for training and education of these individuals, one of the main causes of high unemployment amongst this population is a discrepancy between required and offered occupations. 36

These are some estimations based on the up to now activities and experience of “Save the Children UK“

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One of the problems that this population faces, related to the health service, is access to tools for displaced people, which is based on a restrictive and in some cases. very discriminating criteria. Moreover, the list of tools covered by health insurance do not cover all the necessary equipment and in addition, the Ministry of Health has a contract with only one distributor of tools which has a limited range. Most health facilities cannot be physically accessed by people with disabilities, whilst actually getting inside these facilities is even worse. Also, there is no single health worker who can communicate using sign language or a single gynecological facility that can be physically accessed by the women with disabilities. Other problems that people with disabilities face in Montenegro are limited access to information (especially for blind and deaf people), limited access to different facilities, lack of sport facilities and recreation. Vulnerable Children and Elderly The Montenegrin Strategy for the Alleviation of Poverty and Social Exclusion also focuses on children and the elderly as vulnerable population categories. Out of the total Montenegrin population, 17.6% are under 16 years old. The proportion of poor in this age group is higher than in other groups. i.e 12.4% of the population under the age of 16 is considered to be poor or 23.1% of the entire population living under the poverty line are children. An even higher rate of poor in this age group can be seen among the RAE, refugees and IDPs. The vulnerability of children is especially evident in some categories, such as children without parents, children living in households with social problems, children in families where violence is present, etc. Social services to children and youth are mainly provided through institutional systems whilst services provided through other channels are not yet developed. A significant problem is the lack of methods for early detection, recording and categorization of disabilities as well as other health problems which could enable timely treatment and rehabilitation. Research conducted in 2007 showed that one in four women in Montenegro have been fiscally violated. According to the responses of their mothers, 17% of children are victims of physical abuse whilst 13% are victims of psychological abuse. The position of all the groups analyzed regarding poverty, but also some others, such as different categories of women or members of ethnic groups, presents the greatest challenge for future action. All vulnerable groups face similar problems as those treated by the APSE strategy. However, these particular groups are also facing some more specific problems. That is why, in addition to the APSE Strategy, several documents have been developed during the last five years. All these documents are compatible with the strategy, and together with it, present a platform and time table for future action aimed at improving the social position of these groups. Also, all these documents present a starting point for resolving some of the problems that exist in particular areas. The documents are: the National Strategy for the Permanent Status Solution of Refugees and IDPs, the Action plan “Decade of Roma inclusion 2005-2015”, the

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Strategy for the Improvement of REA Status in Montenegro, 2008-2012, the Strategy for the Development of Social and Child Protection, the Strategy for the Inclusion of People with Disabilities, the Strategy for the Protection of the Elderly, etc 3.5.

Conclusion

Absolute poverty in Montenegro affects a relatively small percentage of the population (11.3 % according to the 2006 data), with the poor concentrated in North and in rural areas. The poverty rate levelled between 2005 and 2006, but the depth and the severity of poverty declined in the meantime. There are some groups which are at a higher risk of poverty such as larger households, households with three or more children, households headed by lower educated and unemployed persons. Poverty as well as limited access to resources and services needed for participation in society are particularly present in some population groups such as the Roma, refugees, IDPs, people with disabilities, children and the elderly. Recognizing the specific problems of these population groups, GoM has drafted separate strategies whose implementation should increase the participation of these groups in different aspects of society (education, labor market) and will increase their access to services. Despite a lack of reliable data, these documents present a good working plan for the alleviation of poverty and social inclusion. However, despite the expressed and obvious political will, implementation of the defined policies is not evident. Thus, the major challenge in the future is to present an efficient implementation of planned activities as well as to carry out active monitoring of the implemented process. Efficient implementation will require much more coordinated, multi-sectorial and multi-institutional action as well as intensive communication between all stakeholders, especially between those at national and local levels. However, even more important is the leadership role, not only of the government but of a specific body created to lead, monitor and evaluate the whole process of alleviation of social exclusion. Efficient monitoring requires reliable and accurate data. The analysis of poverty and social inclusion in Montenegro shows a significant lack of accurate data on poverty and social inclusion. The newest available data on poverty is from 2006 and is still based on the household budget survey, whilst Leaken indicators have still not been calculated. The newest data on some vulnerable groups refers to the year 2003. This creates a significant gap in knowledge on social inclusion, especially amongst the most vulnerable groups. Thus, one of the tasks for the future will be the improvement of knowledge and provision of data sets on social exclusion, through the improvement of existing information and through the implementation of new and regular research and analysis.

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3.6.

References for the Chapter 3

1. European Commission – Social Protection in 13 candidate countries – a comparative analysis, 2003 2. CoE, OSCE, Stability Pact – Survey on Roma, 2002 2. Government of Montenegro – Decade of Roma Inclusion 2005-2015, 2005 4. Government of Montenegro – Strategy for Resolving Issues of Refugees and Internally Displaced Persons, 2005 5. Government of Montenegro – Development and Poverty Reduction Strategy, 2004 6. Government of Montenegro – Strategy for Alleviation of Poverty and Social Exclusion, 2007 ISSP- Household Budget Survey, Podgorica, Issues 1-13 2002-2004. 7. ISSP – Montenegro Economic Trends, issues 8-25, 2000-2006, Podgorica 8. ISSP – Omnibus Survey – Podgorica, Decembar 2005. 9. ISSP - Public Social Assistance and the Poor -Coverage and Effectiveness, Policy paper, ISSP, 2006. 10. ISSP/UNDP – Human Development Report for Montenegro – Managing Diversities, UNDP 2005 11. ISSP – Living Standards and Poverty in Montenegro, ISSP, 2003 12. MONSTAT – Statistical Year Book, 2000, 2004,2005, 2006, Monstat 2000-2007 13. MONSTAT/UNICEF – Multi-indicative cluster survey on females and children in Montenegro, Final draft report, 2007

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14. Institute of Economic Zagreb – Social Protection and Social Inclusion in Croatia, May 2006 15. Official Gazette of Montenegro - Labor Law(2003), Law on Pension and Disability Insurance (2003), Law on Voluntary Pension Insurance (2006), Issues from 2003-2006, Podgorica 16. ISSP – Financial Sustainability of the PIO Fund, PIO Fund 2005 17. ISSP – Transition Report for Montenegro 2003, ISSP, Podgorica 2004 18. ISSP – Social Protection and Poverty in Montenegro, 2004 19. MONSTAT – Statistical Year Book, 2000, 2004,2005, 2006, Monstat 2000-2007 20. MONSTAT, Poverty analysis 2005 and 2006 Podgorica, 2008 21. MONSTAT and Strategic Marketing Research Agency, Montenegro Multiple Indicator Cluster Survey 2005-06. Final Report, Podgorica, 2007 22. OECD, Centre for cooperation with Non-members- Education Policies for Students at Risk and those with Disabilities in South Eastern, Europe: Bosnia-Herzegovina, Bulgaria, Croatia, Kosovo, FYR of Macedonia, Moldova, Montenegro, Romania and Serbia, 2007 23. UN, Economic Commission for Europe- Country Profiles on the Housing sector, Serbia and Montenegro, 2006 24. Municipality of Podgorica, Program of Social Housing Policy in Podgorica 20072010, 2006 25. Government of Montenegro – Law on Floor Property, 2004, 26. Government of Montenegro -Housing Policy Action Plan in Montenegro, 2005 27. Government of Montenegro- Development Strategy of Social and Child Protection 2008-2012, 2007

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3.7. 3.7.1.

Annex for the Chapter 3 Research on Poverty

The first individual household survey was conducted in June 2000 by the OCHA sub-office in Podgorica, (OCHA, 2000). The sample size of the survey was 2,000 permanent resident households from all Montenegrin municipalities. Additionally, four bi-monthly UNDP Household Surveys were conducted from September 2000 to March 2001 covering a random sample of the same size as in the first research (UNDP, 2001). These two initiatives were followed by the initiative by the Montenegrin economic think tank, the Institute for Strategic Studies and Prognoses (ISSP) that created, developed and implemented the multifunctional Household Income and Expenditure Survey (HHS) in 2001. During 2001 and 2002, the ISSP conducted six rounds of the survey. Support for these surveys was provided by the European Commission Food Security Programme, USAID Office in Montenegro, Chesapeake Associates from Washington and the World Bank. This ISSP survey provided data on which the first estimation of the poverty line and the level of poverty were estimated in Montenegro, and then published in the joint publication of ISSP and World Bank, “Living Standards and Poverty in Montenegro”. In addition, the results of the 2002 ISSP surveys were used for drafting the National Development and Poverty Reduction Strategy (PRSP) which was adopted in October 2003. Also, the ISSP had undertaken HHS in 2003 and 2004. In addition, in 2003, the ISSP with the support of the UNDP, conducted a household survey amongst Roma, Ashkaelia and Egyptians (RAE), refugees and internally displaced persons, which provided input for two strategic government documents, the Strategy for Resolving Issues of Refugees and Internally Displaced Persons and Millennium Development Goal, and later for the Decade of Roma Inclusion. The newest data on poverty, announced during the preparation of this report, is provided by the official statistical institution, the Statistical Office of Montenegro (MONSTAT). Data is based on the MONSTAT Household Budget Survey from 2005 (the last time that MONSTAT conducted this type of survey) and 2006. The sample size for this survey was 1560 households and the sample was based on The Population and Housing Census (PHC) conducted in November 2003. Data was collected based on a diary completed by selected households. Data referred to the whole year and due to that, seasonal impact was very low. Also, data analysis was done in accordance with methodology and recommendations from the World Bank. The preparation of this document was characterized by a very wide participatory process in which all segments of Montenegrin society took part, Parliament, the international community, social partners, the civil sector, international development partners and representatives of marginalized groups. The strategy presented a three year plan, after which the need for updating would occur. Also, in the meantime,

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Montenegro adopted a significant number of strategies related to other areas and shifted from IDA to IBRD financing. Due to all this, the Government of Montenegro, the Ministry of Health and Social Welfare, started to work on a new version of the PRSP strategy. The result of this work was the new Strategy for the Alleviation of Poverty and Social Exclusion (APSE), adopted in January 2007. The poverty profile presented in the Strategy is based on data provided by the ISSP Household Income and Expenditure Surveys in 2002, 2003 and 2004, as well as from the aforementioned Household Survey carried out amongst the Roma, Ashkaelia and Egyptians (RAE), as from 2004 there have been no other surveys conducted that could be used for this purpose.

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3.7.2.

Statistical annex

Table 3.0: “Modified OECD equivalence scale“ used in MONSTAT poverty analysis Household size 1 adult 2 adults 2 adults, 1 child 2 adults, 2 children 2 adults, 3 children

Equivalence scale 1 1.5 1.8 2.1 2.4

Table 3.1: Poverty Incidence in Montenegro

2005

2006

National absolute poverty line in €/month/equivalent adult Poverty Rate (%)

144.68 11.3

11.3

[8.5, 14.1]

[8.8, 13.8]

Poverty Gap (%)

2.1

1.9

Poverty Severity (%)

0.7

0.6

52.6

53.6

42.8

44.4

18.7

17.2

622,851

625,142

70,495

70,686

95% Confidence Interval

Poverty line as a % of average consumption Average consumption of the poor as a % of average consumption Average deficit (%) Estimated population Estimated number of the poor

Note: Poverty line is expressed in monthly terms in 2006 prices. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

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Table 3.2: Inequality in Equivalent Consumption and Income

2005

2006

Consumption Consumption share of the bottom decile

0.042

0.043

Consumption share of the top decile

0.216

0.202

Gini coefficient (per eq. adult)

0.259

0.243

Theil entropy measure

0.114

0.097

Mean log deviation

0.110

0.097

Income share of the bottom decile

0.017

0.022

Income share of the top decile

0.289

0.273

Gini coefficient (per eq. adult)

0.382

0.359

Theil entropy measure

0.266

0.239

Mean log deviation

0.301

0.256

Income

Note: Equivalent consumption and equivalent income are adjusted for differences in regional prices. Income does not include imputed housing rent. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

Table 3.3: Population at risk of absolute poverty

2005

2006

Broad poverty line=absolute poverty line plus 25% in €/month/equivalent adult Poverty rate (proportion of the vulnerable population)

180.85 25.3%

23.6%

[21.9, 28.8]

[20.3, 26.9]

Poverty gap

5.3%

5.0%

Poverty severity

1.7%

1.6%

157,750

147,430

95% Confidence Interval

Vulnerable population

Note: Poverty line is expressed in monthly terms in 2006 prices. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

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Table 3.4: Poverty Risk by the Household Size, 2006

Headcount poverty rate

Relative poverty risk

Fraction of the poor

Fraction of the population

One person

9.8%

0.87

3.6%

4.2%

Two persons

7.4%

0.66

7.5%

11.4%

Three persons

3.0%

0.26

3.7%

14.3%

Four persons

5.8%

0.51

13.0%

25.5%

Five persons

12.0%

1.06

23.8%

22.4%

Six persons

17.9%

1.59

22.1%

13.9%

Seven and more

35.6%

3.15

26.3%

8.3%

Note: Relative poverty risk is calculated as the poverty rate of the subgroup divided by the overall poverty rate. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

Figure 3.1: Poverty Incidence by Number of Children in the Household, 2006

Poverty headcount rate (%)

25

23.0

20

15

13.2 National average

10

10.7

8.2

5

0 no children

1 child

2 children

3+ children

Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

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Table 3.5: Poverty Risk by Age and Gender of the Household Head, 2006

Headcount poverty rate

Relative poverty risk

Fraction of the poor

Fraction of the population

15-34 years

8.5%

0.75

4.5%

6.0%

35-44 years

11.7%

1.04

15.9%

15.4%

45-54 years

12.7%

1.13

34.4%

30.5%

55-64 years

11.0%

0.98

23.5%

24.1%

65+ years

10.2%

0.90

21.7%

24.0%

Female

11.8%

1.04

87.0%

83.5%

Male

8.9%

0.79

13.0%

16.5%

Note: Relative poverty risk is calculated as the poverty rate of the subgroup divided by the overall poverty rate. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

Table 3.6: Poverty Risk by Education of the Household Head, 2006

Headcount poverty rate

Relative poverty risk

Fraction of the poor

Fraction of the population

Primary or less

20.0%

1.768

48.7%

27.6%

Vocational secondary

12.5%

1.110

28.0%

25.2%

Technical secondary

7.6%

0.673

19.7%

29.3%

Gymnasium

7.7%

0.684

1.1%

1.6%

Higher education

1.7%

0.151

2.5%

16.3%

Note: Relative poverty risk is calculated as the poverty rate of the subgroup divided by the overall poverty rate. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

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Table 3.7: Poverty Risk by Activity Status of the Household Head, 2006

Headcount poverty rate Employee

Relative poverty risk

Fraction of the poor

Fraction of the population

7.2%

0.640

27.9%

43.5%

Self-employed

17.9%

1.585

13.7%

8.6%

Unemployed

26.4%

2.337

20.4%

8.7%

Retired

10.5%

0.928

35.2%

38.0%

Other inactive

28.6%

2.529

2.8%

1.1%

Note: Relative poverty risk is calculated as the poverty rate of the subgroup divided by the overall poverty rate. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

Table 3.8: Poverty Risk by Location and Region, 2006

Headcount poverty rate

Relative poverty risk

Fraction of the poor

Fraction of the population

Podgorica

9.4%

0.832

19.3%

23.1%

Other urban

6.2%

0.545

20.9%

38.3%

Rural

17.6%

1.554

59.9%

38.5%

North

17.8%

1.573

50.0%

31.8%

Central

8.5%

0.747

35.8%

47.9%

South

7.9%

0.698

14.2%

20.3%

Note: Relative poverty risk is calculated as the poverty rate of the subgroup divided by the overall poverty rate. Source: Poverty analysis 2005 and 2006 Podgorica, 2008, MONSTAT

Table 3.9: Poverty rate: Head Count – RAE population Montenegro Poverty rate: Head Count 95% confidence interval Poverty and Economic Vulnerability: Head Count 95% confidence interval Percent of all poor RAE

North

Central

South

52.3 [45.2-59.3] 75.6

77.6 [66.9-88.1] 92.8

39.4 [31.0-47.8] 67.2

82.5 [73.2-91.8] 95.2

[69.8-81.5] 100.0

[87.2-98.4] 9.7

[59.4-75.1] 52.3

[90.8-99.6] 38.0

Source: ISSP/UNDP Household Survey. Note: Standard errors in parentheses.

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Table 3.10: Poverty rate: Head Count – Refugees Montenegro Poverty rate: Head Count 95% confidence interval Poverty and Economic Vulnerability: Head Count 95% confidence interval Percent of all poor refugees

North

Central

South

38.8 [29.8-47.8] 68.9

30.0 [8.2-51.8] 77.1

62.4 [51.6-73.2] 84.3

27.3 [13.5-41.2] 57.9

[60.7-77.1] 100.0

[57.5-96.7] 10.4

[76.4-92.2] 51.1

[44.4-71.4] 38.5

Source: ISSP/UNDP Household Survey. Note: Standard errors in parentheses.

Table 3.11: Poverty rate: Head Count – IDPs Montenegro Poverty rate: Head Count 95% confidence interval Poverty and Economic Vulnerability: Head Count 95% confidence interval Percent of all poor IDPs

38.6 [31.1-46.0] 73.2 [67.6-78-8] 100.0

North

Central

South

51.1 [37.3-64.8]

50.4 [37.4-63.3]

13.8 [6.7-20.9]

81.7

83.8

54.0

[72.7-90.6]

[75.4-92.3]

[44.4-63.7]

51.6

36.6

11.8

Source: ISSP/UNDP Household Survey. Note: Standard errors in parentheses.

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4.

Chapter 4: The Pension System

4.1. 4.1.1.

Organization of the Pension System Pension Reform

Since the beginning of the transition, the PAYG pension system in Montenegro has continuously faced funding challenges due to the huge rate of unemployment and undeclared work, falling fertility rates, an ageing population, as well as the slow overall growth of the economy. Negative demographic trends and decreased employment are just some of many reasons that have spurred the implementation of pension reform. The ratio between pensioners and workers has not been favourable in the last years. The ratio used to be 1 pensioner to 7 workers, but today that ratio is almost equal. This has contributed towards insolvency, which is bogged down with high deficits and irregular pension payments. Moreover, during the 1990s, Montenegro has been faced with some additional challenges, including economic sanctions, recession, privatisation and economic restructuring. Early retirement and less strict rules for disability pensions have been used as tools for solving redundancy problems in the economy. On the other hand, the Government has tolerated undeclared work as a coping mechanism in Montenegrin households. All this has led to an increased number of pensioners and a decreased number of contributors, since the largest part of job creation has been in the informal economy. The demographic reasons are related to the ageing of the population, which has resulted in an increased burden on the guaranteed pension funds of the state. The demographic picture of Montenegro has significantly changed due to the war, which caused further increases in the number of pensioners (or pension system beneficiaries) in relation to the number of employees paying pension contributions (or pension system contributors). Each year the dependency ratio (or number of the employed persons paying contributions relative to the number of pensioners) has constantly fallen, with the exception of 2006 and 2007 (Table 4.2.). The result is an increased gap between the inflow and outflow of money. The reasons for reforming the PAYG system are obvious. The funds collected from contributions were used to support the current generation of pensioners. There were no guarantees that in the future there would be sufficient funds to sustain pension payments in the future, or even to raise the standard of living of the pensioners. Like other PAYG systems in the region, the Montenegrin system featured low ages for retirement (60 for men and 55 for women), a full old-age pension entitlement based on 35 and 30 years of service for men and women respectively, and various supplements for years of service, irrespective of contributions actually paid (including additional payments for injury, hard work conditions, special privileged occupations, doubling the service period for veterans). Also, contribution rates were high during previous years, and this is one of reasons for the reform of the system. Contribution rates amounted to

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12.3% of the gross wage in 1980, and this rate had an increasing trend and achieved 24% of the gross wage in 1994. After 2004, contribution rate decreased slightly as a result of pension reform measures. Reasons for this increase were the low level of employment, and a higher number of pensioners. Contribution rates since 1980 are given in Table 4.5. The pension reform in Montenegro was initiated in 2001. The future pension system is abstracted as a fully funded pension system, with an anticipated reform of the mandatory pension insurance and the introduction of a mandatory private pension insurance as well as voluntary private pension insurance. The reform was supported and designed with technical and financial assistance from the World Bank. To date, reform of the pension system has included a reform of the mandatory pension insurance, i.e. the reform of the PAYG system in 2004 through the drafting of a new Law on Pension and Disability Insurance. The law began was implemented in 2004. The reform measures of the Law were: ƒ

The gradual increase of the minimum age for pensioners to 65 years for men and 60 years for women. The age limit for old-age and early retirement pension was raised by five years, with the interim period being from 2004 until 2012; the age limit for acquiring rights to an old-age pension was gradually increased (until the end of the year 2012), to 60 years of age for women and 65 for men, and for the rights to an early retirement pension, to 55 years of age for women and 60 for men

ƒ

The estimate of the pension base, worked out by calculating the average of total years’ service, instead of the ten most favourable ones

ƒ

A change in the retirement formula. The new retirement formula takes into account the personal coefficient and the pension point value at the day of retirement. The personal coefficient is calculated based on the years of experience/insurance and the personal annual coefficient, which is the ratio between the average wage of the individual and the national average. The personal annual coefficient is calculated by dividing the annual average wage of the individual by the average wage in Montenegro. The annual personal coefficient equals one if the wage of individual is equal to the national average. The personal coefficient is determined by dividing the sum of personal annual coefficients by the number of years, with each year being equal to 1, each month to 0.0833 and each day to 0.00274. The pension is than calculated by multiplying this personal coefficient and the pension point value on the day of retirement.

ƒ

The pension adjustment was changed. Pensions and the pension value for one personal point were adjusted according to the "Swiss formula", in which pensions are adjusted semi-annually by combining 50% of the wage growth and 50% of the consumer inflation increase. The pension value for one personal point has been 4.73 EUR since January 1st 2008.

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ƒ

The possibility to “buy” years of contributions as an option when fulfilling certain eligibility criteria for retirement was abolished.

ƒ

Some benefits, like allowances for care and assistance were revoked for new users, however, they remained eligible for those who were receiving this benefit prior to 2004.

Besides the aforementioned mentioned changes, a later revision of the law37 included a decrease in the employer’s contribution by 20%. The overall contribution rate has decreased from 24% of the gross wage to 21.6% of the gross wage. In addition to this, in 2007, the Montenegrin parliament adopted a Law on Mandatory Social Security Contributions.38 According to this law, the contribution rate for pension insurance amounted to 21% of the gross wage in 2008 (the employer pays 9%, the employee pays 12%), and these contributions will amount to 20% in 2010 (the employer will pay 8%, the employee will pay 12%). (see Table 4.1.) On the other hand, tax regulations have changed in line with the changes in the level of the rate of contributions, by broadening the base for the payment of pension contributions. All income from employment/working activity are subject to the payment of contributions (honoraria, severance payments, bonuses, etc), except for fringe benefits if they are paid within the minimum amount set by the General Collective Agreement. This first reform measure had a positive effect because the state pension fund increased its revenues on a paid contribution basis. There has been a noticeable growth in contribution payments. In 2006, according to state pension fund data, revenues amounted to €138.46 million, a growth of 17% from the previous year. Pension contributions in 2006 increased by 20% from tradable activities, 10% from nontradable activities, 32% from self-employment activities, and 17% from agriculture. The share of revenues from contributions in overall PIO fund revenues was 71.21%, and continued to show an increasing trend in 2007 reaching 73.2%. In January 2007, the number of all pension and disability insurance users was 109,545, or more than 17% of the total population. There were 93,577 users of pension benefits or over 15% of the total population. The remainder is related to the allowance for care and assistance, as well and others. The number of disability pensioners amounted to 23,539 or 25% of the total number of retired persons. Although reform of the PAYG system was implemented, pensions are still a major expenditure in the state budget. The next reform measure to be enacted was to adopt the Law on Voluntary Pension Funds39 at the end of 2006. The Security Commission of Montenegro (SCMN) adopted certain acts that precisely defined established rules for working and for regulating the control of funds. The Security Commission has already adopted 11 acts40 that were necessary to enable voluntary pension funds to function. One can subsequently expect the establishment of these funds in the first half of 2008. The new law allows the 37

Changes and amendments to Law on Pension and Disability Insurance – Official Gazette of Montenegro, 29/05 38 Law on mandatory social security contributions – Official Gazette of Montenegro, 13/07 39 Law on Voluntary Pension Funds, Official Gazette of Montenegro, 78/06, 14/07 40 Official Gazette of Montenegro, 57/07

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establishment of private pension funds where anybody can invest on a voluntary basis. Voluntary pension insurance will cover all persons who wish to obtain a higher level of financial security. All citizens who are not covered under mandatory insurance can also be included, i.e. the unemployed, for whom the contributions can be paid by a third party. The insured person decides on the size of the contributions himself. In addition to private pension companies, trade unions and employers may also establish these voluntary pension funds. 4.1.2. Institutions Pension services related to the current PAYG system in Montenegro are the responsibility of the Pension and Disability Insurance Fund of the Republic(Republički fond penzijsko-invalidskog osiguranja – PIO Fund). The Republic Fund for Pension and Disability Insurance (PIO Fund) works independently. The activities of this fund are based on terms that have been established in the Law on Pension and Disability Insurance.41 To meet its obligations the Fund must responds with all assets. The Fund is registered in the Central Register of the Commercial Court. This institution is also charged with pension and disability protection. Pension and disability protection is based on social insurance, i.e. on paying contributions to the PIO Fund. The PIO Fund is financed by contributions of employees, transfers from the central budget as well as from other sources (revenues form the ownership42, from the interests and other sources of revenues43). The main activities of PIO Fund are as follows: 1. to secure rights to pension and invalid insurance and to provide assistance in exercising these rights; 2. to drafts the annual fund budget and annual financial reports; 3. to keep records on insured persons and users, their earnings, i.e. bases for contribution calculation, as well as the paid pension; 4. to send reports to tax authorities regarding paid contributions; 5. to implement international agreements regarding pension and invalid insurance; 6. to undertake measures for the regular collection of fund revenues, and 7. other activities as defined in the law44. 41

Law on Pension and Disability Insurance, Official Gazette of Montenegro, 54/03 In the privatisation process PIO Fund has been identified as owner of shares in companies that are in state ownership. 43 Previously PIO Fund had revenues from Settlements and Payments Office fees, as well as from some special taxes, which were abolished by the tax reform and payment system reform, when the payment operations were transferred to commercial banks. 44 Law on Pension and Disability Insurance, Official Gazette of Montenegro, 54/03 42

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There are several other important institutions responsible for the pension system that includes private pension scheme, including: 1. the Security Commission of Montenegro 2. pension companies 3. voluntary pension funds 4. the Custodian 5. the Tax Office 1. The Security Commission of Montenegro is responsible for monitoring and regulating pension funds. It is there to protect the interests of pension funds and users in the voluntary pension insurance scheme. It issues licenses for pension funds. This institution is also responsible for monitoring of operating these institutions. 2. Pension companies – According the Law45, a pension company is a company established as a joint stock company or a limited liability company; its scope of activities is to establish and manage one or several voluntary pension funds. The founders of a pension company are obliged to receive the authorization of the Security Commission (SCMN) to establish a pension company. Upon the payment of the equity capital and the registration in the court register, the pension company must obtain an operating license. The equity capital of the pension company amounts to a minimum of 250€ thousand in the case of voluntary funds. The assets of a pension company are managed separately from the fund assets, since the ownership of those assets is separate. A founder must, prior to foundation, receive an operating license from the Security Commission of Montenegro (SCMN). In addition to the articles of incorporation and other documents certifying financial and operating capacities, the founders are obliged to submit to SCMN pension schemes within the voluntary pension insurance. An insured person, who is also a member of the voluntary pension fund, can select a pension company that he/she will open a pension agreement with, and to which he/she will transfer his/her pension savings. According the Law, pension companies can invest pension funds assets in: t-bills and other short-term securities that are issued by the government, bonds and other long-term securities that are issued by municipalities, stock of companies (tradable on stock exchange), securities tradable in the capital markets in OECD countries and EU member states, participation units and shares of investment funds (if those funds invest in securities that are tradable in Montenegro or in OECD and EU countries). Maximum investment limits in one company or in one instrument include a maximum of 10% of each security.

45

Law on Voluntary Pension Funds, Official Gazette of Montenegro, 78/06

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The Pension Fund assets may not be invested in the following instruments46: - shares, bonds and other securities that are either unlisted or not publicly traded; - instruments that are legally prohibited, or inalienable assets; - commodities that are not frequently quoted in organized markets and have uncertain valuation, for example antiques, works of art, and motor vehicles; - real estate; - shares, bonds and other securities issued by any shareholder of the managing pension company, the custodian and affiliated entities; - derivatives that are identified by SCMN The pension company is entitled to three types of compensations, which may be collected from the fund’s assets as a percentage of: - paid contributions, - total assets of the pension fund; - a fee for cancellation of membership in a voluntary fund. 3. Voluntary pension fund – This institution does not have the attributes of a legal person. The pension fund is founded and managed by a pension company with the aim of collecting contributions from its fund members and to invest such funds so as to increase their value. The assets of a pension fund can only be invested in accordance with the provisions of the Law in order to maximize the return from the investment solely for the benefit of the pension fund members. The action is subject to ensuring the following: the security of pension fund assets; diversification of investment risk and maintenance of adequate liquidity. Voluntary pension funds, which are required to have a minimum of 200 members, are found within the third pillar. There are no registered voluntary pension funds yet. Two voluntary pension funds are in the process of registration in Montenegro. 4. Custodian – a bank or specialized depository institutions responsible for securely keeping any securities and keeping records, and executing investment orders according to the Law. A custodian signs a contract with the pension company and has the obligation of monitoring the management of the fund assets. The custodian cannot own stocks of the pension company. The pension fund cannot own securities of the custody bank. Both the pension company and custodian must get permission from SCMN to 46

Law on Voluntary Pension Funds, Official Gazette of Montenegro, 78/06

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sign the contract. The custodian is obligated to inform SCMN about every pension company’s prescription that is not in accordance with rules of SCMN or with rules that are related to the management of pension fund assets. 5. According to the Law on Tax Administration,47 the Tax Office of the Ministry of Finance is responsible for monitoring and collecting all mandatory social insurance contributions, such as health insurance contributions, unemployment insurance contributions, and first pillar pension contributions. One of the greatest benefits of the pension reform is likely to be the improved functioning of institutions, including transparency of the institutions involved, as well as the contribution collection. 4.2.

Benefits

Pension and disability insurance in Montenegro provides the following benefits: - the right to an old age pension benefit (age pension), - the right to a disability pension benefit, - the right to survivors’ pension benefit, - the right to a minimum pension benefit, - the right to body injury compensations, - the right to allowance for care and assistance, - and the right to health insurance. These rights are based on the compulsory payment of pension-disability contribution. (Table 4.6.) Pensions. Eligibility to receive this benefit is based on the compulsory contribution of employed persons and his/her employer to the pension-invalid insurance. There are several types of pensions: old-age, survivor (family) and disability pension, minimal, and additional benefits for body injury. The Fund for Pension and Disability Insurance is charged with the administration of these benefits. To receive age pension, one must be either a male over the age of 65 or a female over the age of 60 with a minimum of 15 years of insurance, or 40 years of experience for male and 35 years for female, and a minimum age of 55. The basis for calculating the size of an age pension is the average salary that the insured person earned during the period from January 1st 1970 to December 31st of the year preceding the year in which the right is exercised. The size of the pension is calculated by multiplying the personal 47

Law on Tax Administration, Official Gazette of Montenegro, 29/05

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points of the insured person (obtained by multiplying the personal coefficient and his/her years of working experience) with the value of the pension for one personal point of the insured person48. Disability pension is received by insured persons whose working ability is reduced by 75% or fully lost, because of an untreatable health condition. Disability could be caused by a work injury, professional disease, or an out-of-work injury or disease. The insured person whose working ability is reduced by 75% has a right to a partial disability pension, while person who completely lost its working ability has aright to a full disability pension. (Table 4.7.) Survivors pension is received by family members (children, widow/widower) of an insured person who has at least 5 years of insurance and 10 years of pension working experience or has fulfilled the requirements for disability or old-age pension, and the family member of deceased user of old-age/disability pension (Table 4.6.). The size of the family pension is determined as a percentage of pension that pensioner received at the moment of death in relation to the number of family members: - one member 70 %; - two members 80 %; - three members 90 %; - four and more members 100 %. Minimum pension is received by an insured person whose calculated age pension is lower than the minimum pension. The minimum pension is calculated similarly to oldage pension, but the personal coefficient in case of minimum pension amounts to 0.5. According the law this pension cannot be lower than €45. From 2008 it is worth €71.6. This amount is calculated in the same way that the old-age pension is calculated for one personal point. It also relates to the survivors pension. Body injury benefit is received by an insured person with significant damage to some organs or parts of the body which limit the normal functioning of the organism, regardless of whether it causes a disability or not. The insured person whose body injury is at least 50% is eligible for this benefit. The amount of this benefit is determined as a percentage of benefit base, which represents 90% of the average monthly wage after taxes and contributions. According to the level of body injury the amounts are as follows: 1) for 100% body injury .......... 40% of the base; 2) for 90% body injury ............ 36% of the base; 3) for 80% body injury ............ 32% of the base; 4) for 70% body injury ............ 28% of the base; 5) for 60% body injury ............ 24% of the base; 6) for 50% body injury ............ 20% of the base. (see Table 4.8.)

48

See Pension and Disability Insurance Law for details, Official Gazette 54/03.

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Allowance for care and assistance is a benefit based on pension and disability insurance established in the old law.49 In the new law50 this right is no longer regulated. However, according to the new law the right to an allowance for care and assistance has not been abolished for current beneficiaries, however there will be no new beneficiaries. The allowance for care and assistance was provided to beneficiaries of age, family and disability pensions, which due to disability needed extra care and assistance of another person. Persons who have right to this benefit are: - persons with a first category disability and who need another person’s assistance. In the case where they do not have a spouse or children, or if the child is unable to work or is less than 15 years of age; - insured person who was blind when acquiring employment or became blind during employment; - insured person who suffered from dystrophy or any similar muscular illness, or has acquired such a disease during his/her employment. There are four categories of allowance, depending on health conditions of pensioner, and levels for May 2005 (Table 4.9.). The size of the allowance is adjusted using the same formula as pensions. 4.3.

Financing of the Pension System

Since the pension system in Montenegro is still PAYG, the financing of the pension system is based on contributions made to the state’s Pension Insurance Fund. Both employers and employees make contributions to PIO fund. Self-employed persons and farmers also contribute to the PIO Fund. The employer’s share of the contribution is 9% of the gross wage, whilst the employee’s share of the contribution is 12% of the gross wage. According to the law,51 farmers pay 20% of the average wage in Montenegro, but they have the option to pay a higher contribution if they so wish. Transfers from the central budget compensate for any deficit in the pension system. In 2007 the pension fund deficit amounted to 2.5% of the GDP. The principal source of funding for the pension system is revenue from gross salary contributions. Assistance from the state budget covers the difference, as well as the payment of pensions for special categories of pensioners. The gap between expenditure and revenue became an inherent responsibility of the state budget. The revenue from contributions paid for pension insurance has increased slightly during last few years.

49 50 51

Law on Basics of Pension and Disability Insurance, Official Gazette of FRY, 30/96, 70/ 01, 3/02, 39/02, 5/03 Law on Pension and Disability Insurance, Official Gazette 54/03 Law on mandatory social security contributions – Official Gazette of Montenegro, 13/07

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One of the explanations for the increase in revenue from contributions could be a shrinking irregular economy. The largest share (71%) in the structure of total pension insurance revenue and receipts is revenue from contributions, 28% is revenue from the state budget, and 1% is other revenues and receipts. Total revenue and receipts in 2006 amounted to €194.75 million, out of which revenue from contributions amounted to €138.46 million, state budget revenue to € 54.33 million, and other revenue and receipts to €1.95 million. According to the budget execution for 2007, revenue from contributions amounted to € 173.84 million or 73.2% of total revenues (the plan anticipated 67.5% share), revenue from the state budget amounted to €61.15 million or 25.7% of total revenue and other revenue and receipts should therefore have thus amounted to €2.54 million or 1.0% of total revenue.( Table 4.10.) The expenditure for gross pensions and pension payments constituted 97.2% of the total expenditure and other expenditure was 3.8% of the total expenditure, so the total expenditure in 2007 amounted to €235.15 million. The Ministry of Finance has added all the extra-budgetary funds, including the Republic Fund for Pension and Disability Insurance (PIO Fund) into the State Treasury System.52 This should have a positive influence on cash management and will result in a higher liquidity of the state budget, as well as of the pension fund budget. All revenue and expenditure from these extra-budgetary funds have been included into a consolidated treasury account, and have become part of the state budget. This will also increase transparency in government spending. 4.4.

System Coverage

According the Law on Mandatory Social Security Contributions, contributors for pension and disability insurance are:53 1.Persons who are employed by an employer, 2.Persons who work a temporary or occasional job, 3.Selected or appointed persons, if they receive a salary for their work, 4.Members of the Board of Directors in a business enterprise, other legal persons and members of the board of directors in public companies, and institutions where they get a salary for their work. 5. Referred persons, if they are not already insured according to the legislation of that country or, if the international contract does not specify anything else.

52 53

This decision is based on Law on Budget, Official Gazette of Montenegro, 40/01, 44/01, 71/05 Law on mandatory social security contributions – Official Gazette of Montenegro, 13/07

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6. Citizens of Montenegro who live in the territory of Montenegro but are employed by a foreign or international organization or institution, foreign diplomatic and consul representation or to foreign legal or civil persons, if the international contract does not specify anything else. 7. Citizens of Montenegro who work abroad; 8. Foreign persons and persons without Montenegrin citizenship, but who live on Montenegrin territory and are employed by foreign legal or civil persons, if the international contract does not specify a different arrangement, of if they are not insured in the other country; 9. Foreign persons and persons without Montenegrin citizenship who live on Montenegrin territory and are employed by internationals organizations and institutions, foreign diplomatic and consul representations or by foreign legal or civil persons, if such insurance is anticipated in the international contract; 10. Foreign persons and persons without Montenegrin citizenship who live on Montenegrin territory, who are employed by domestic legal and civil persons, based on special contracts and agreements regarding international-technical cooperation, if the international contract does not specify anything else, of if they are not insured according to the regulations of the other country 11. Persons who earn monetary compensation in accordance with the employment law; 12. Entrepreneurs and persons who perform professional or other activities; 13. Persons who receive an agreed salary; 14. Religious clerics, monks and vestals; 15. Farmers. Contributions for insured persons listed in paragraphs from 1 to 6, and from 8 to 10 are paid both by insured persons and employers; whilst for unemployed persons (paragraph 11) the Employment Office of Montenegro pays contributions, and for persons from paragraph 14, religious communities pay contributions. 4.5.

Sustainability of the Current Pension System

The costs of the pension insurance system, based on the principle of intergenerational solidarity (resulting in a public mandatory pension scheme) are high in Montenegro. The share of total pension expenditure amounted to 11.44% of the GDP in 2000, and decreased to 10.27% of the GDP in 2001. In 2002 this expenditure rose to 11.2% of the GDP (Table 4.11). In 2007, total pension expenditure amounted to 9.61% of the GDP, which is still very high. This expenditures is expected to be even higher in the longterm. Pension expenditure according to different types of pensions is given in Table 4.12.

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After 2002, the GDP growth rate was higher than the growth rate of total pension expenditure. The result of this was a decrease in the share of pension expenditure in the total GDP, which was due to the way in which adjustments (indexing) of pensions were made every 6 months, 50% of the salaries growth index, and 50% of the cost-of-living increase index (consumer price index). The share of pension expenditure in the gross domestic product was lower due to the extension of the period used for calculating the pension size. Montenegro has been faced with a negative population growth rate and fertility rate (children per woman) below 1.9. According to the demographic projections of the United Nations these trends are similar to those in other European countries.54 In the long run, this reality could place Montenegrin public finances on an unsustainable path, and will require the government to adopt fiscal policy actions aimed at avoiding a deficit resulting from an aging population. The birth rate decreased from 15% in 2000 to 13.5% in 2003 and was only 11.8% in 2005. The decrease in the birth rate and the increase in the mortality rate have caused a decrease in population growth from 9.7% in 1991 to 8.8% in 2001 and only 2.4% in 2005.55 It has resulted in an ageing Montenegrin population, meaning a higher share of people who are over 65 years old in the total population. Regarding demographic projections,56 the number of elderly persons aged 65 and above will rise, and their proportion in the total population will grow from 12.4% in 2001 to 18.4% in 2031. At the same time, the working age population is projected to fall and its share in the total population will decline from 67% in 2005 to 64.9 percent in 2031. The old-age dependency ratio will rise from 18.5% in 2005 to 28.3% in 2031. For the long-term sustainability of the future pension system in Montenegro, there is a need to improve the budget balance and debt reduction, and to increase compliance with the law. If the present retirement situation continues in the future, it is highly likely that the demand for an increase of transfers from the budget to the State pension fund will also continue, as will the need to raise the contribution rate. 4.6.

Adequacy of the Future Pension System

The actuarial projections regarding the future pension system in Montenegro are not yet finished. These projections should include the adequacy of the future fully funded pension system in terms of current and future poverty rates among pensioners, as well as its influence on different groups in the society (ethnic, gender, age-groups etc.). Since these projections are not finished, it is extremely difficult to assess adequacy of future pension system, although some conclusions can be drawn from the existing legislative and statistical data.

54 55 56

United Nations demographic projections, 2003 MONSTAT, Annually Report, 2006 Bacovic M, Demografske promjene i ekonomski razvoj – analiza investicija u humani kapital, 2006

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The average paid pensions in 2007 were as follows: for old-age pension – €191.70, for disability pension – €144.72, and for survivors’ pension – €123.70. (Table 4.13.) The guaranteed minimum pension for older people is an important aspect of the social protection system. Minimum pensions generally provide benefits to people who have not accrued sufficient pension entitlements in the public scheme. The minimum pension scheme is therefore acting as a social safety net for those with incomplete careers, or who have had very low earnings during their working lives. The minimum age pension is calculated in the same way as the age pension, but the personal coefficient in the case of the minimum pension amounts to 0.5. According to the law, this pension cannot be lower than €45. The minimum pension is also adjusted every half year. Since January 2008 it amounted to €71,6. Calculating one personal point is done in the same way as for the old-age pension. The last available data for the PIO Fund (April 2008) on the total number of old age pensioners who received the minimum pension in accordance with the Law on Pension and Disability Insurance, which was applied from January 1st, 2007 was 1104 or 1.15% of total number of pensioners. 579 individuals received oldage retirement benefit, 207 persons received disability retirement benefit and 318 persons received the survivors’ retirement benefit. It is noticeable that a small number of pensioners received the minimum pension. There are, however, a large number of old age pensioners who receive a pension between the minimum and average amount. (Table 4.14.) According to the Law on Pension and Disability Insurance, pension coverage in Montenegro is broad and applies to all employees, self-employed persons, and farmers. At the end of 2007, there were 156,408 insured persons in the country. For the same period, the number of pension beneficiaries (old-age, disability and survivor pension) was 93,477. Also, in February 2008 there were 2,976 beneficiaries of pensions for serving in the military. There are more than 30,000 retired persons in Montenegro who receive less than €100. This is disconcerting information. The replacement rate in 2007 amounted to 56.7%, which was less than in previous years. There has been a noticeable decline in the replacement rate in Montenegro over the last several years. The dramatic decline in the replacement rate was especially noticeable between 2005 and 2006. This could be explained by the new average wage methodology used by MONSTAT, which was applied in 200757. MONSTAT also revised data on wages for 2006 and the replacement rate for 2006 changed. If this wage increase trend were to continue, replacement rates would continue to decline and would amount to 50.2% in 2010, 39.3% in 2020 and 32.2% in 2030. (The average wage and the average pension by types in the period from 2001 to 2007 are given in Table 4.15. Replacement rates are given in Table 4.16.)

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The average wage was calculated by dividing the sum of wages for approximately 100,000 employees from the MONSTAT sample by the total estimated number of the registered employees (145.000 at the time). This resulted in an underestimation of the average wage. Since January 2007, the average wage has been calculated by dividing the total sum of wages by the number of individuals who actually received this wage. The old methodology was introduced in 1997, as an attempt to slow down an increase in pensions, which was directly linked to the increase in the average wage.

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Data on the total number of people who are not covered by pension insurance is difficult to assess. The Law on Pension and Disability Insurance regulates general conditions for old-age pension insurance – the age limits for men (65) and women (60) and the work period limit (15 years), as well as conditions for retirement according to the pension service – men (40) and women (35). Those who do not fulfil the above conditions are not allowed to be included in the pension insurance. This does not imply that they are not covered with any other social benefit, such as social assistance. They also might continue to work, or rely on their families. However, those people who do not receive social assistance, or do not work or lack family support, are the most exposed to the risk of poverty. One can speculate that amongst this group there is a large number of women, who have never worked. Women are at a greater risk of poverty than men. Moreover, the opportunity to accrue full pension rights has traditionally been much lower amongst women, which is a legacy of societal gender roles (see structure of contributory pensions by gender, Table 4.17. and Table 4.18.). According to MONSTAT data, the number of pensioners who are over the age of 65, except for beneficiaries of survivors’ pensions amounted to 41,630 in October 2007, which was 51.8% of the total population over the age of 65. The number of female pensioners over the age of 65 amounted 12,267 or 26,76% of total female population over the age of 65, while the number of male pensioners who were older than 65 amounted to 29,363 or 85,1% of total male population older than 65. On the other hand, the total number of persons who were more than 65 years of age amounted to 80,311 in 2007, of whom 45,825 were women and 34486 were men. One could speculate that among this part of population there was a large number (especially women) who were not covered by pension insurance. Also, according to analysis on social protection and poverty in Montenegro, there were 6.2% of users on basic social assistance who were over 65 years of age. Between households whose members were beneficiaries of basic social assistance, 1.5% were households whose members were all over 65 years of age. Also, according this analysis, 2.6% of the population over 65 years of age did not receive any assistance and 13% of pensioners constituted the poorest part of population in Montenegro.58 Elderly farmers who did not receive a pension have a right to the benefit for elderly farmers, which the Ministry of Agriculture, Forestry and Water Resources is in charge of. This benefit was introduced by the Ministry of Agriculture in 2002 as a form of assistance to farmers, men (over 65 years of age) and women (over 60 years of age) who spent their lives working in agriculture, as previous laws did not provide farmers with the means to pay for insurance. All elderly farmers with agricultural land, who have paid taxes regularly, and do not have any other benefits, are eligible. Both the husband and wife have a right to this benefit. One condition of this benefit for elderly farmers is that these persons do not have any other form of assistance. The amount of this benefit used to amount to 30€ per month. The Ministry of Agriculture, Forestry and Water Resources decided to increase this benefit to 40€ in January 2008. In April 2008 there were 5968 beneficiaries of this benefit for elderly farmers in Montenegro. More than 50% of users of this benefit are women, mainly widows. 58

Social Protection and Poverty in Montenegro, ISSP, 2005

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Elderly persons are entitled to an old-age pension when they reach the age of 65 (60 for women) in addition to 15 years service pre-retirement. Those elderly persons who do not fulfil these conditions are not covered by pension insurance. Also, there are some groups who have limited pension insurance access. These groups include: the unemployed, redundant workers (or laid-off workers), those working only with short-term employment contracts for which the employees pays only personal tax but not the pension-disability insurance, those working in the informal sector, which includes in particular ethnic community groups such as Roma. These groups are the most exposed to increased risks of poverty in old age. The practice of underreporting salaries in the private sector (especially in the small and medium enterprises) is quite common (according to LFS 2007 wages are underreported for 17.5% of all employees), which results in lower revenues from contributions. This will impact on future pensioners whose pension benefits will be lower than the average pension and most likely will be close to the minimum pension. Also, due to the migration of labour from Montenegro to other, mainly Western European countries, many people now get pensions from abroad. However, exact figures regarding the numbers of pensioners receiving pensions from abroad are not available; some estimates indicate that the foreign pensioners account for 1.5% to 2% of pensions received in Montenegrin households59. Another relevant issue when it comes to the adequacy and transparency of the pension system in Montenegro, is the issue of pension adjustment that occurred during 20022004 . Since July 2002, the Montenegrin government has introduced progressive personal income taxation and has broadened the tax base for personal income tax, MONSTAT has changed the methodology for average wage calculations. However, data on average wages was not been published for the period from July 2002 to January 2004, and when the data finally was published, the government decided to increase pensions by 7.4% for the whole period. Three bi-annual adjustments were overlooked. On the other hand, due to changes in methodology, the average wage in Montenegro almost doubled, and this gave pensioners reasons to appeal against the government decision. In 2007, the court made its final ruling that the government should make adjustments to pensions and that there was compensation in damages that should be repaid to pensioners due to the lack of adjustment made to pensions. The total amount of the debt was estimated as approximately eight average pensions per pensioner plus a 20% adjustment in the level. Until now, two additional pensions have been paid, one in December 2007 and one in April 2008. The first adjustment was implemented in December 2007, whilst the second will be made in December 2008. The government has decided that the remaining debt, amounting to €130 million, will be paid during a three-year time frame. One further issue concerning the transparency of the pension system in Montenegro is related to the process of the dismissal of redundant workers. According to the Law on 59

ISSP Household budget survey 2001-2004

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Mandatory Social Security Contributions, when an employee is dismissed, the employer is obligated to pay the employee a severance payment of at least six average wages (in practice usually 24 average wages), as well as to pay contributions for these wages to the state pension fund. These contributions are not attributed to those individuals and are thus not included into the pension calculation when this employee retires. 4.7.

Political and Policy Direction of Future Reform

The strategic goals and principles of the pension insurance system, based on intergenerational solidarity, are rooted in the overall reform of the pension system, which should establish a sustainable system that is adequate for the economic and social development of Montenegro, including ensuring an adequate level of social security for the population in case of old age, disability and death. In realizing this, the strategic goal of the pension insurance system based on intergenerational solidarity is to ensure an adequate level of social security for current pension beneficiaries in the old age. The next steps in the pension system reform concentrate on the further implementation of voluntary pension insurance. The Security Commission has adopted 11 acts that are necessary for the activity of voluntary pension funds. We can therefore expect the establishment of these funds during the first half of 2008. Voluntary pension insurance will allow all persons with income, but who are not covered by the public pension scheme, to have access to pensions. Although the Law on Pension and Disability Insurance called for mandatory private pension insurance, it is not still clear when this type of insurance will be introduced. The terms for implementing a private mandatory pension scheme are not specified. A mandatory funded system could have some advantages, but also some problems. Some of the advantages of a mandatory funded system could be increased saving, capital market development, banking sector development, internationalisation of financial investments, as well as more professional management. Those who contribute might see the benefits more clearly, hence collection might be easier and future benefits could be improved if investment were carried out properly. There is an opinion that the mandatory funded system, as a pension reform option, could be designed in the first place to reach the main goal of the pension system: an adequate diversified and sustainable pension. Workers should not depend on future generations or on government promises, but should individually face their responsibilities for care in their old age. The more a person contributes to his/her pension fund, the more they will receive in the future. The World Bank has been the most influential organization for pension reform in the region. However, the experiences of countries that have implemented a mandatory funded system did not confirm that a mandatory funded system was the best reform option. This implementation would require transition costs. High transition costs would be one of the main challenges of a future pension system. Therefore, the implementation of

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private mandatory pension scheme would be a challenge for public finances in the future. The problem is how to finance the deficit, which would also exist if a private mandatory pension scheme were to be implemented. A mandatory funded system might also face similar issues to those that exist in the current system, such as high contribution rates and lack of confidence in the system, which in turn lead to avoidance of contribution payments, disincentives to contribute resulting from lack of transparency, as well as some other problems. If a new supplementary system is going to be introduced and the problems in the old system remain the same, there is a possibility that the latter system would be even less sustainable and even less capable to provide basic protection to people in their old age. A mandatory funded system might overburden the old system even more. Another problem to consider is how to ensure a broad coverage in the system. Montenegro needs to analyse the national system’s situation at present, and do a comparative analysis with mandatory pension systems in other countries. Private mandatory pension system implementation needs a detailed economic analysis and assessment of administrative costs of a funded scheme, as well as adequacy and sustainability of such a system if these costs are to be shared between low numbers of contributors. In other words, the size of working age population and more importantly the labour force could lead to a situation where pension funds would not be able to achieve sufficient economies of scale. A reform option could be to further improve the existing public mandatory pension system and the voluntary pension insurance that has recently been implemented in Montenegro. This type of insurance would enable an additional pension amount to be paid in old age, and the possibility for some of those persons, not currently covered by pension insurance, to receive a pension in old age. The rural population, for example, is not covered by pension insurance, but has some income. This would ensure broader coverage. Also, this type of pension system would not add additional fiscal pressure, and the stability of PAYG system would not be threatened. Also, there would not be the high cost of transition, which would exist in case of private mandatory funded system. Savings would increase and the funds collected through voluntary pension insurance would be invested in the capital market. It would also contribute to capital market development. There is, however, the threat that voluntary pension insurance would not play such an important role as expected. People in Montenegro still do not have confidence in such an insurance scheme, and they would prefer to save money in banks because of the potential risks that returns would not be as expected. Moreover, there is no saving habit. 4.8.

Main Challenges of Current and Future Pension System in Montenegro

Over the last several years, the Montenegrin government has introduced many measures to improve the efficiency and transparency of pension contribution collection. This has lead to a more efficient system of control and enforcement of contributions. Pension system movement has been affected to a large extent by economic growth and the movement of employed persons. It can be expected that in future these factors will

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have a decisive effect on the pension system in Montenegro. Demographic movements also influence the pension system. Montenegro has a high share of older population and has experienced a very unfavourable change in the working population (low fertility rate, high emigration rate) which all together negatively affect demographic figures. Demographic factors will play a major role in the future challenges of the reformed pension system in Montenegro, and will become a more important issue for the financial sustainability of the pension fund in the future. Namely, according to demographic projections,60 the population in Montenegro will increase by 3.1% in the period from 2006 to 2021, or from 624,240 in 2006 to 643,844 in 2021. However, after 2021 the trend will reverse into negative figures, and the population will record decreasing growth rates, however, overall figures will be 2.2% higher in 2031 as compared with 2006.61 (Table 4.3). The key dynamic change to the Montenegrin population in this period will be the change in the age structure, which will result in the ageing of the overall population. The share of the population over the age of 65 will increase from 12.4% in 2001 to 13.4% in 2011, and even further to 18.4% in 2031. Analogous with that, the index of dependency of older persons will increase from 18.5% to 19.8% and further to 28.3%, respectively (Table 4.4). Such a trend will result in an increased burden on both the pension and social systems. The share of the population below 14 years of age will decrease from 20.6% in 2001 to 19% in 2011 and further to 16.7% in 2031. The percentage of people in the working-age group (15-64) will drop from 67% in 2001 to 64.9% in 2031. It will underpin a crisis in the Montenegrin pension system. Depending on reform options, high transition costs could be one of the main challenges faced by the future pension system. Transition costs are defined as the difference between total contributions to the private mandatory pension system and total savings in the public mandatory pension scheme. High transitional costs in a fully funded pension system could be dangerous for the sustainability of the whole pension system. Diverting several percentage points of contribution payments for private mandatory pension system participants would result in a funding gap for the PAYG system. The shortfall in public pension revenues would have to be financed by additional funding from the PAYG system. The size of additional transfers would depend on how much of the additional deficit were financed by PAYG savings, the current budget or by debt. One of current problems is that people employed in "undeclared work" do not contribute to the current pension system. There are many examples of people working in the private sector (especially in the building industry, hotels and catering, retail trade and other private services) but who are not formally employed. Employers pay wages in cash and do not pay any contributions for people working for them. The consequence of this is that people working for these employers do not contribute to the pension system. At the same time they are not covered by health insurance.

60 61

Bacovic M, Demografske promjene i ekonomski razvoj – analiza investicija u humani kapital, 2006 Projection of population number is based on the cohort model

90

Evasion and partial compliance of contributions for pension insurance in the formal sector of economy is one of the most important problems inherited by the Montenegrin economy. There are many examples of employers who pay contributions for employees only at the minimum contribution base. These employers tend to be concentrated in the building industry, hotels and catering, and the retail trade. This form of evasion can be expected to cause a significant reduction in future pensions. Evasion of contributions is a priority issue since it has a severe impact on the financing and the viability of the pension system. The most efficient collecting networks should undertake the task of relevant legislation with clear functions which should be enforced. Information networks, databases and coordination mechanisms should be put in place. 4.9.

Conclusions

The fiscal sustainability of the reformed mandatory pension insurance has been enhanced in the short term; however, the pension system needs to be improved further. The main goals should be the creation of an institutional framework that will encourage people to work longer and more productively. The main challenges are to include those who are not formally employed, or are not sufficiently employed to receive a minimal pension, into the system. The minimum pension should be such that it will not damage work stimulation. One of the priorities of reform is also to reduce the costs of administering the system.. One of the main objectives should also be to strengthen solidarity within and between generations. This can include a risk of sharing between insured persons or of reducing income inequality. Main policies should be oriented towards reducing the number of people who are at risk of poverty. However, the pension system in Montenegro should not only aim to ensure a certain standard of living for the elderly, but more generally to provide the means for people to maintain, to a reasonable degree, the living standard they achieved during their working lives, and to enable pensioners to participate actively in public, social and cultural life. The government must also keep in mind that objectives should be oriented towards raising employment rates to overcome some of the troubling existing trends. The main objectives are related to making the pension system more sustainable through sound public finances, or by balancing benefits and contributions. With regard to the modernization of the system, the main objectives should be to adopt measures to promote more flexible employment and career patterns, to bridge the opportunity gap between women and men, and to demonstrate that the pension system is able to meet challenges.

91

4.10.

References for the Chapter 4

1. European Commission – Social Protection in 13 candidate countries – a comparative analysis, 2003 2. ISSP- Household Budget Survey, Podgorica, Issues 1-13 2002-2004. 3. ISSP – Montenegro Economic Trends, issues 8-25, 2000-2006, Podgorica 4. ISSP – Omnibus Survey – Podgorica, Decembar 2005. 5. ISSP - Public Social Assistance and the Poor -Coverage and Effectiveness, Policy paper, ISSP, 2006. 6. ISSP/UNDP – Human Development Report for Montenegro – Managing Diversities, UNDP 2005 7. ISSP – Living Standards and Poverty in Montenegro, ISSP, 2003 8. MONSTAT – Statistical Year Book, 2000, 2004,2005, 2006, Monstat 2000-2007 9. MONSTAT – Monthly Statistical Review, issues from 2005, 2006 and 2007, MONSTAT 10.Institute of Economic Zagreb – Social Protection and Social Inclusion in Croatia, May 2006 11. Official Gazette of Montenegro – Law on Budget (2001, 2005), Labor Law(2003), Law on Pension and Disability Insurance (2003), Law on Voluntary Pension Insurance (2006), Law on mandatory social security contributions (2007), Issues from 2003-2006, Podgorica 12. ISSP – Financial Sustainability of the PIO Fund, PIO Fund 2005 13. ISSP – Transition Report for Montenegro 2003, ISSP, Podgorica 2004 14. ISSP – Social Protection and Poverty in Montenegro, 2004 15. MONSTAT – Statistical Year Book, 2000, 2004,2005, 2006, Monstat 2000-2007 16. United Nations - Demographic Projections, 2003 17. MONSTAT – Women and men in Montenegro, 2008 18. Bacovic M. – Demografske promjene i ekonomski razvoj – analiza investicija u humani kapital, ISSP, Ideja, Podgorica, 2006 19. Analysis on Social Protection and Poverty in Montenegro, ISSP, 2005

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4.11.

Statistical Annex for the Chapter 4

Table 4.1. Personal income tax and social security contributions rates (2006-2010) 2006

2007

2008

2009

2010

% of gross wage Employee Personal Income tax

0-23

15.0

15.0

12.0

9.0

Pension contribution

12.0

12.0

12.0

12.0

12.0

Health insurance contribution

7.5

7.5

6.5

5.0

4.0

Unemployment contribution

0.5

0.5

0.5

0.5

0.5

Employer Pension contribution

9.6

9.6

9.0

8.5

8.0

Health insurance contribution

6.0

6.0

5.5

5.5

5.0

Unemployment contribution

0.5

0.5

0.5

0.5

0.5

Chamber of commerce contribution

0.32

0.32

0.32

0.32

0.32

Surtax on personal income tax

13-15%PIT 13-15%PIT 13-15%PIT 13-15%PIT 13-15%PIT

Source: PIT Law (2006), Draft Law on Social Security Contributions (2007), PIO Law (2003), Health Insurance Law (2004), Employment Law (2002)

Table 4.2. Some indicators of pension system

Net wages and salaries

Average pension

Ratio wage to pension

Number of insured persons

Number of pensioners

Dependency ratio

2001

107.71

92.71

86.07372

141,112

83,938

1.68

2002

171.43

108.88

63.5128

140,778

86,103

1.63

2003

173.99

121.59

69.88333

142,672

89,235

1.60

2004

194.90

123.91

63.57619

143,479

90,433

1.59

2005

212.91

128.72

60.45747

144,349

91,808

1.57

2006

282

142.7

50.60284

151,176

93,477

1.62

2007

338

185.67

54.93195

156,408

93,692

1.67

Source: PIO Fund, MONSTAT

Table 4.3. Age structure of population of Montenegro (2001-2031) Age structure of the population of Montenegro (2001-2031) Year

2001

2011

2021

2031

0-14

126,911

120,817

116,976

106,288

15-64

412,856

429,983

426,148

414,113

65+

76,529

85,072

100,720

117,360

Total

616,296

635,872

643,844

637,761

Year

2001

2011

2021

2031

0-14

20.60%

19.00%

18.20%

16.70%

15-64

67.00%

67.60%

66.20%

64.90%

65+

12.40%

13.40%

15.60%

18.40%

Total

100%

100%

100%

100%

Source: Bacovic M. – Demografske promjene i ekonomski razvoj – analiza investicija u humani kapital, ISSP, Ideja, Podgorica, 2006

93

Table: 4.4 Index of dependency 2001

2011

2021

Total

49.3

47.9

51.1

2031 54

Children

30.7

28.1

27.4

25.7

Elderly

18.5

19.8

23.6

28.3

Source: Bacovic M. – Demografske promjene i ekonomski razvoj – analiza investicija u humani kapital, ISSP, Ideja, Podgorica, 2006

Table 4.5. Contribution rates for pension insurance (1980-2008) Year

Contribution rate

1980-1981

12.30%

1982-1983

13.80%

1984

15.60%

1984

14.4% (since June 1st)

1985-1986

14.40%

1986

17% (since March 1st)

1987-1988

19.60%

1988

18.6% (since June 1st)

1989

18.60%

1990-1991

21.40%

1992-1993

22.54%

1994-2004

24% (till June 2004)

2004

22.8% (till December 31st)

2005-2007

21.60%

2008

21%

Source: PIO FUND

Table 4.6. Pension benefits Program

Type of benefit

Eligibility

Old age pension

Monthly payment

Disability pension

Monthly payment

Persons of 65/60 years of age and 15 years of insurance or 40/35 years of insurance and a minimum of 55 years of age Insured persons whose working ability is reduced by 75% or completely lost

Family pension

Monthly payment

Bodily injury compensation Allowance for care and assistance

Monthly payment ranging from €35 to €75 Monthly payment ranging form €35 to €120

Health insurance for pensioners

covers the cost of health insurance

Family members of insured person with at least 10 years of pension insurance and surviving family member of deceased pensioner Insured persons with significant damage to some organs or body parts resulting in limits to normal functioning Allowance for care and assistance provided to recipients of old age, family and disability pensions, who require a home nursing aid due to disability Health insurance is provided for all pensioners and their family members, if it is not provided otherwise

Funding Contributions, and state budget Contributions, and state budget Contributions, and state budget

Implementing agency PIO Fund PIO Fund PIO Fund

Contributions, and state budget Contributions, and state budget

PIO Fund

Contributions, and state budget

PIO Fund

PIO Fund

Source: Law on Pension and Disability Insurance, 2003

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Table 4.7. Pensioners from 1990-200762 OLD AGE 18,002 20,180 20,697 21,416 22,023 24,065 26,152 28,701 30,180 31,092 32,230 34,190 36,010 37,531 39,771 41,214 41,473 41,850

1990. 1991. 1992. 1993. 1994. 1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007.

DISABLED 27,217 30,531 29,411 29,781 29,099 28,553 28,152 28,109 28,081 28,116 28,050 27,649 27,253 26,809 26,147 25,539 25,455 25,004

SURVIVOR 18,923 19,716 20,220 18,682 19,095 20,096 20,696 21,248 22,157 22,768 23,105 25,254 25,572 25,843 27,115 26,238 26,549 26,838

TOTAL 64,142 70,427 70,328 69,879 70,217 72,714 75,000 78,058 80,418 81,976 83,385 87,093 88,835 90,183 93,033 92,991 93,477 93,692

Source: PIO Fund

Table 4.8. Average amount and number of body injury users in period from 2000-2007 Year

Number of users

Average amount in €

2000.

9170

16.80

2001.

8727

18.78

2002.

8495

21.10

2003.

8234

21.44

2004.

7924

23.38

2005.

7713

24.12

2006.

7399

26.69

2007.

7195

31.97

Source: Fund PIO

Table 4.9. Amount of allowance for assistance and attendance by categories (May 2005) CATEGORY I category II category III category IV category

MONTHLY AMOUNT IN € 120.00€ 84.08€ 47.66€ 35.68€

Source: Fund PIO

62

Number of pensioners is related to number of pensioners in March each year, except for 2004 where the data are for December.

95

Table 4.10. PIO Fund budget during 2000-2007 (€ millions) Revenues 1) Contributions 2) State Budget transfers 3)Other revenues Expenditures 1)Gross pensions 2)Other expenditures

2000 121.96 76.97

2001 141.25 73.68

2002 155.76 93.11

2003 166.35 105.85

2004 165.84 115.98

2005 169.88 118.31

2006 194.75 138.46

2007* 237.53 173.84

25.71

38.77

46.76

38.61

37.72

44.14

54.33

61.15

19.28 121.91 91.65

28.80 132.96 114.56

15.89 152.35 122.08

21.89 161.43 131.46

12.13 168.48 144.80

7.43 172.33 144.91

1.95 195.60 187.73

2.54 235.15 228.55

30.27

18.40

30.27

29.97

23.68

27.42

7.86

6.58

Source: PIO Fund, Ministry of Finance, ISSP calculations

Table 4.11: Pension expenditures as percent of GDP Year

Total pension expenditures Pension expenditures (% of GDP) 2000

121.91

11.44

2001

132.96

10.27

2002

152.35

11.20

2003

161.43

10.69

2004

168.48

10.09

2005

172.33

9.49

2006

195.6

9.10

2007

233.15

9.61

Source: PIO Fund

Table 4.12: Pension expenditures (in million €) Age pensions

Disability pension

Survivor pensions

Total

2000

39.328

24.984

20.057

84.369

2001

51.004

30.515

25.063

106.582

2002

55.613

31.502

26.694

113.809

2003

61.487

32.540

28.286

122.313

2004

70.773

34.404

30.431

135.608

2005

75.945

34.838

31.563

142.346

2006

83.477

37.387

34.367

155.231

2007

96.727

43.422

39.838

179.987

Source: PIO Fund

Table 4.13: Average pensions Year

Age pension

Disability pension

2000

118,71

79,12

Survivor pension Average pension 80,63

2001

110,32

84,07

82,46

92.71

2002

129,04

93,10

85,12

108.88

2003

136.38

103.33

92.72

121.59

2004

149.39

111.62

100.36

123.91

2005

154.92

115.27

102.06

128.72

2006

167.73

122.40

107.87

142.7

2007

191.70

144.72

123.70

185.67

92,82

Source: PIO Fund

96

Table 4.14. Statistical overview of paid pensions for April 2008 Amount of pensions (€)

Age pensions

Disability pensions Survivors pensions

Total

Number of users 71.6

579

207

318

1.104

71.61-111.41

837

437

1.828

3.102

111.42

1.906

5.253

7.713

14.872

111.43-121.54

447

824

1.611

2.882

121.55

2.019

1.245

1

3.265

121.56-141.82

1.193

1.906

3.186

6.285

141.83

1.386

1.003

1

2.390

141.84-162.07

1.395

2.365

2.379

6.139

162.08

1.212

462

3

1.677

162.09-182.33

1.827

2.136

2.272

6.235

182.34

3.068

291

2

3.361

182.35-200.00

2.804

1.725

3.286

7.815

200.01-250.00

7.251

3.323

2.614

13.188

250.01-300.00

6.954

1.951

1.466

10.371

300.01-350.00

3.646

850

635

5.131

350.01-400.00

2.382

504

274

3.160

400.01-688.80

3.695

580

245

4.520

688.81

132

9

0

141

688.82-851.39

50

4

0

54

>851.40

1

1

42.784

25.076

27.834

95.694

Source: PIO Fund

2

Table 4.15. Average wages and average pensions by types Average wages

Age pension

Disability pension

Survivors pension

2001

107.71

110.32

84.07

82.46

2002

171.43

129.04

93.1

85.12

2003

173.99

136.38

103.33

92.72

2004

194.9

149.39

111.62

100.36

2005

212.91

154.92

115.27

102.06

2006

282

167.73

122.4

107.87

2007

338

191.7

144.72

123.7

Source: MONSTAT, PIO Fund

Table 4.16: Replacement rates during 2001-2007 Age pension

Disability pension

Survivors pension

2001

102.4

78.1

76.6

2002

75.3

54.3

49.6

2003

78.4

59.4

53.3

2004

76.6

57.3

51.5

2005

72.8

54.1

47.9

2006

59.5

43.4

38.2

2007

56.7

42.8

36.6

Source: MONSTAT, PIO Fund

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Table 4.17. Pensioners by age groups and gender, except beneficiaries of survivor pensions on 31st October 200763 Total

Women

Men

Age groups

Number

%

Number

%

Number

%

Total

69,062

100

25732

100

43330

100

up to 24

3

0

1

0

2

0

25-29

11

0

5

0

6

0

30-34

56

0.1

23

0.1

33

0.1

35-39

158

0.2

50

0.2

108

0.3

40-44

570

0.8

194

0.8

376

0.9

45-49

1,550

2.2

521

2

1,029

2.4

50-54

3,555

5.2

1,455

5.7

2,100

4.9

55-59

9,438

13.7

5,455

21.2

3,983

9.2

60-64

12,002

17.4

5,724

22.2

6,278

14.5

65-69

16,469

23.9

5,474

21.3

10,995

25.4

70-74

12,755

18.5

3,523

13.7

9,232

21.3

75-79

7,542

10.9

1,847

7.2

5,695

13.1

80-84

3,345

4.8

929

3.6

2,416

5.6

85 and more

1,519

2.2

494

1.9

1,025

2.4

Unknown

89

0.1

37

0.1

52

0.1

Source: Women and men in Montenegro, MONSTAT 2008

Table 4.18: Pensioners by years of pension insurance and gender on 31st October 2007 Total Years of pension insurance

Women

Men

Number

%

Average pension

96,762

100

161.8

27,807

100

UP TO 4

806

0.8

117.5

234

0.8

112.7

572

0.8

119.5

5-9

2,422

2.5

97.7

543

2

100.7

1,879

2.7

96.9

10-14

4,482

4.6

100.3

1,357

4.9

101.3

3,125

4.5

99.8

15-19

9,652

10

107.8

3,166

11.4

110.6

6,486

9.4

106.5

20-24

14,660

15.2

123.3

5,123

18.4

116.1

9,537

13.8

127.3

25-29

15,329

15.8

146.2

4,545

16.3

144.8

10,784

15.6

146.8

30-34

16,825

17.4

170.8

4,364

15.7

173.6

12,461

18.1

169.8

35-39

18,098

18.7

199.4

6,892

24.8

190.9

11,206

16.3

204.7

40 AND MORE

14,488

15

228

1,583

5.7

217.5

12,905

18.7

229.2

TOTAL

Number

%

Average pension

Number

%

Average pension

152.5

68955

100

165.6

Source: Women and men in Montenegro, MONSTAT 2008

63

It is not possible to precisely identify the age groups for beneficiaries of survivor pensions by intervals presented in the given table. Total number of users on survivor pensions was 27,371 on 31st October 2007.

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5.

Chapter 5. The Health Care System and Long-Term Care

5.1. 5.1.1.

Current Structures Health Profile

The health care system of Montenegro represents part of the health care system in the former SFRY. This system was good in terms of coverage, but inefficient in terms of organization and investment in the health system. As it was promoted access to all health care rights, a picture was formed that citizens had a right to any kind of health care service, regardless of necessity, but without previously developing the conscience of citizens that every health care service has its price and that health care is not free. The area of health in Montenegro is regulated by the Law on Health Protection and the Law on Health Insurance which were adopted in May 2004.64 These two laws, along with the Law on the Production and Circulation of Tobacco and Smoking Prohibition and the Law on Medicines and Medical Appliances represent the necessary legal framework for the reform process. All acts that were issued by the Ministry for Health are harmonized with the norms and regulations of the European Union, as well as the recommendations and declarations of the World Health Organization. Total health expenditure as a percentage of the GDP in Montenegro amounted to 6.59 % in 2005, which represented an increase compared with 2004 (6.23%). In the beginning of the 2000’s Montenegro began an extensive reform of its healthcare system with the support of the World Bank. The strategy for health care development was created and it defines the activities in the system that aim at the implementation of objectives set out in the health policy by 2020. Montenegro has achieved certain results in the development of the health care system but at the same time has come up against more demands for its improvement. Because of that, the health care system reform has started, mainly with changes in the organization of health services and in the restructuring of levels within the health system, particularly in primary health care, but also concerning financing methods in order to ensure the stability of the system. The reform of the whole health care system and its operation within the framework of social and economic development and the potential of a country that has set its aim as joining Euro-Atlantic associations, requires a number of changes in the old system and the development of a new one in line with recommendations and guidelines from WHO and EU strategy documents for health care development, with the main objective to be adding years to life and even more importantly, adding life to years. Because of that, further development of the health care system should be based on the financial potential of the Montenegrin economy which would inevitably lead to selecting and setting new priority objectives and tasks. 64

These laws have replaced the Law on Health Protection and Health Insurance which originate from as far back in time as SFRY, and was revised several times (Official Gazette of SR Montenegro nos. 39/90, 21/91 and Official Gazette of the Republic of Montenegro, nos. 30/92, 58/92, 6/94, 27/94,16/95, 20/95 and 23/96).

99

The reasons for health care reform should be looked for in inefficiently functioning health care systems, and problems should be identified, from inadequately organized health care services, methods of collecting and allocating resources, the absence of an adequate system to monitors and control different segments of the health system and insufficient quality in the service provided. All of these problems have been present for many years in the health care system. The health insurance and health care system reforms shall penetrate all segments and shall have strong implications on events in other segments of society. 5.1.1.1.

Health Indicators65

It is very difficult to measure the health status of one nation as there is no one single indicator which can be used. Therefore, few indicators will be considered. The mortality rate increased from 6,8% in 1991 to 8,8% in 2001, increasing further up to 9,6% in 2006. Considering the fact that the increase in the mortality rate is one of the basic indicators of a worsened overall health condition of the population, this increase should be taken very seriously. Most often deaths caused in Montenegro during these years have been due to: cardiovascular system diseases, cancer, respiratory system diseases, injuries, poisoning and the influence of outside factors. These causes together lead to 91,45% of total number of deaths in 2004. It would be interesting to compare the percentage of deceased who sought medical help relative to the total number of deceased, in a longer time frame. In fact , compared to the 1964 level of 55,3%, this percentage in 2004 was much higher, reaching 88%. The increase has been steady over four decades. Another basic indicator of the overall health condition of the population is infant mortality rate. This rate increased from 11,1% in 2000 to 14,6 % in 2001. In 2002 the rate level decreased to 10,8%, while in 2004 the level decreased even further, down to 7,8%. In 2005 the rate increased again, but it was still lower than the 2000 level. In fact, the level was 9,5 %. However, this rate is still very high, considering the average of developed European countries, which is 5%. It is difficult to explain why there were rapid changes in the infant mortality rate on a year to year basis, but it could be because of the overall situation in the country. On one hand, it could be that stressful situations during the bombings in 1999 partly influenced an increase in the infant mortality rate during the following years. On the other hand, the infant mortality rate decreased immediately after the beginning of the reform of the health care system, so that a very high infant mortality rate could partly also be explained by that. The birth rate decreased from 15.0% in 2000 to 13.5% in 2003, and to only 11.8% in 2006. This decrease, along with the mortality rate increase, lead to the decrease of the net population increase from 9.7% in 1991 to 8.8 % in 2001. Furthermore, the net increase of the population continued to decrease, and was only 2.% in 2005. As a consequence, the Montenegrin population is getting older. That is, the percentage of those who are over 65 years of age in the whole population has increased. Considering 65

Dynamics of the basic indicators is presented by figure 5.8 in Appendix.

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that this is the most vulnerable group of people, it is obvious to conclude that the overall health condition of the population has worsened. The time series of the percentage of over 65s in the total population is shown in the figure 5.9. In order to make data on the number of over 65s in 1991 and 2003 comparable, the number from 1991 needs to be recalculated using the present citizens’ concept. According to this concept, the percentage of over 65s in the total population was 9.25%. In 2003, the same percentage was 12.41%. Therefore, it will be inevitable that Montenegrin society has to increase health care spending for the oldest population category. Furthermore, the additional reasons for concern are the forecasts about the population dynamics up to year 2031. According to these forecasts, the number of citizens will increase by 3.4% from 2001 to 2031, i.e. from. 616,296 to 637,761. However, as the total population increases, the structure will also change. In fact, the key dynamic characteristic regarding the Montenegrin population will be the increase of the category of over 65s in the total population, which will increase the expenditure of the healthcare system. Vital index (the ratio of births to deaths within a population during a given time) has decreased from 173.4 u 1998 to 154.2 in 2003. In 2005 the value of the index was 125.9. 5.1.1.2.

Factors that influence health status

Smoking is one of the major factors that influence the population’s health in Montenegro. According to the ISSP Household Survey66, average monthly household expenditure for tobacco represented 3.7% of total household expenditure which is an enormously high percentage in comparison to other countries. On the other hand there is no statistical data on number of smokers in Montenegro or the costs of tobacco use and there is no antismoking strategic policy defined. In addition, people are aware of the fact that use of the cigarettes damages their heath but are not aware of the fact that it causes many costs to the users and to the society in general. Heart disease and cancer are two leading killers, but most people do not realize how a substantial part is played by smoking-related deaths. An important side effect affecting health arises from the widespread use of tobacco products, primarily cigarettes, throughout the world. Two types of side effect result from smoking. First of all, smoking itself is unpleasant to many people, possibly more than smokers themselves realize. The second and more serious side effect arising from cigarette smoke has now become more carefully understood - even non-smokers’ health risks increase when they spend considerable time in close proximity with smokers. Many studies conducted over the past several years show significantly heightened risks of lung cancer, heart disease, 66

ISSP conducted a survey on revenue and expenditure during 2004. Results from this survey have been used throughout this chapter. The survey was carried on the basis of a random sample. The sample base was created based on a list of citizens who had a right to receive vouchers in the process of the Mass Voucher Privatization held in 2001. This data base of individuals aged above 18 was marked as the best database in Montenegro, even better then the electoral list. The survey contained samples from 800 households from all Montenegrin municipalities and also referred to household income and expenditure.

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and other lung diseases from non-smokers who live in a house with at least one smoker. Indeed, one study demonstrated that even smokers’ dogs had a 50 percent increased risk of dying from lung cancer, compared with dogs whose owners did not smoke. The magnitude of the second hand smoke morbidity and mortality rate is yet to be fully determined, but evidence continues to accumulate showing this is a more serious side effect than has been previously recognized. Unfortunately, there is no study that clarifies this particular type of side effect in Montenegro. However, even with incomplete information, it seems safe to say that cigarette consumption creates an important health hazard, certainly for those within smoking households, and possibly in other surroundings as well. Now we will summarize some of the findings from the aforementioned study. From a total number of surveyed households, in at least 52%, at least one person is a smoker. This percentage is almost the same in both urban and rural areas. Amongst households consisting of two persons, 39.9% of household members are smokers, and in the households consisting of more than six persons, 70.2% of household members are smokers. Out of all those surveyed, 29.3 % were smokers. Considering genders, we noticed that there are more smokers amongst males than amongst females. Namely, 34.3 % males are smokers, while the same percentage among women is 24.4 %. When we looked at the same percentage amongst groups defined by marital status, we noticed that the highest percentage of smokers was amongst divorced people (47.7 %, meaning that almost every second divorced person is a smoker). Looking at age group categories, the highest percentage of smokers was people between the ages of 36 and 50 years of age. 42 % of people in this group are smokers. The following questions were answered only by people who are or who were smokers. Asked to answer how old they were when they started to smoke, the minimum answer was 9 years, and the maximum 55 years. The average age was 19.3. Most people started to smoke when they were between 11 and 18 years old. It is interesting to note that in the older age group, women were more likely to start smoking than men. Out of all those who have been smokers, every fifth person (20 %) quit smoking. It is more likely that males will stop smoking than females. Namely, 21 % of male respondents quit smoking, while the same percentage among females was 19.4 %. Considering age groups, it is most likely that people over the age of 65 will stop smoking. 37.3 % of respondents over the age of 65 quit smoking. Further, respondents were asked to answer after how many years of smoking they quit smoking. The average number of years was 8.79 (the minimum was 1 and the maximum was 55). Most people, in all groups, quit smoking because of health issues.

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Illnesses related to smoking Out of all the respondents, 41.5 % suffered from respiratory system illness. Almost every fourth person (23.1 %) suffered from coronary illness, and every fifth person (20.8 %) had a disease which could be related to smoking. It is very interesting to mention that more than half of smokers who are sick (52.2 %) believe that their disease is not related to smoking at all. Only 18.8 % of respondents who have some of the above mentioned diseases believe that their disease could have been caused by smoking. Also, it is very interesting to note that more males than females believe that their disease was caused by smoking. Also, more educated persons are more likely to believe that their disease was caused by smoking than less educated persons. Persons who were sick were further asked whether they had to stop their habit or not. Out of all smokers who were sick, 14.6 % of them had had to stop their habit. On average, they had had to stop their habit for two days. Most of them were forced to stop their habit from 2 to seven days (38.6 %). 27.3 % of workers who had had to stop their habit, stopped for 15 to 30 days. Males and more educated people were more likely to stop their habit than females and less educated persons. Environment is also very important factor that influences the health status of the population. Around 40% of the participants in the aforementioned survey think that the environment has bad influence on their health. Problems they are most concerned with are: industrial pollution, (citizens living in the central region are most concerned with this problem), illegal dumps, dumps along the rivers and roads (citizens living in the southern region are most concerned with this problem), as well as pollution of the drinking water (citizens living in the north are most concerned with this problem). Regarding municipalities, the survey showed that citizens of the most highly polluted municipalities (Pljevlja and Mojkovac) were in a worse state of health than citizens living in other municipalities. Therefore, they visited doctors more often than citizens in other municipalities, and incurred higher health expenditure. Also, the number of handicapped persons, as well as persons with chronic diseases was higher. Only 4.3% of those who took part in Pljevlja, and 11% from Mojkovac considered that their state of health was very good, whilst the same percentage from other municipalities was 35% (this is shown on figure 5.11). Also, people from Pljevlja and Mojkovac visited the doctor more often than people from other municipalities, which proved the previously stated fact that the health of people living in the two most polluted municipalities is worse than the health status of citizens in less polluted municipalities. Therefore, it is evident that there are differences between the health of people living in Mojkovac and Pljevlja compared with those living in other municipalities. However, it is important to stress that there are also regional differences. Citizens from northern regions have the worst of opinion regarding their health. Namely, 22.6% of those questioned in northern regions considered their health to be very good, whilst 34.4% of those living in central and 38.1% of those in southern regions, considered their health to

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be very good67. Anyway, Mojkovac and Pljevlja are below the average for the northern region. It is very interesting to mention that in the southern region, Tivat is below the average. In Tivat only 16.7% of citizens think that their health is very good, whilst the same percentages in Ulcinj and Budva are 67% and 54.2%, respectively. If we consider number of handicapped persons, the highest level is in Mojkovac. Almost 14% of participants from Mojkovac were handicapped in some way. In Pljevlja this proportion was only 0.6%, and the average for other municipalities is 4.9%. Most of the handicapped persons suffer from some form of illness which prevents them from performing their regular duties at work. In Pljevlja, none of the handicapped persons could perform regular duties. In Mojkovac, the same was applicable for 94.9% of the handicapped persons, whilst the average in other municipalities was 86.8%. When we consider chronic diseases, 14.6% of participants from Mojkovac suffered from some chronic disease, whilst the same percentage in Pljevlja was significantly smaller (6.8%). The average for other municipalities was 8.5%. Due to the overall situation in the region during the 90s, social factors also significantly influenced health. Citizens were constantly exposed to stressful situations. Low living standards resulted as a consequence of the overall economic situation, created unhappiness which lead to the distancing of people from their surroundings. The number of suicides increased from 73 in 1993 to 138 in 2006. It is interesting that 70% of suicides were committed by males. If we break down data by age groups, 43% of the people who committed suicide were above 55, and 35% of these were between 35 and 54. However, there are no specialized institutions nor is there any kind of advice centre for people with such problems. Since it is not part of the Montenegrin tradition, there is significant resistance towards these kinds of services. Therefore, advice centres should be formed so that people can get adequate healthcare. 5.1.1.3.

Accessibility of the Healthcare system

The same survey can also be used for the analysis of accessibility to the healthcare system. Some finding will be shown here, and later in the paper, accessibility of healthcare to some vulnerable groups will be discussed in more detail as well as universal coverage as way for increasing the accessibility of the healthcare system. Hence, the survey showed that in a one month period, around 6% of population registered health problems. When we say registered, we mean that those persons visited a health institution either due to sickness or injury. Amongst them, almost one third was not able to perform regular duties due to their health. When we consider vulnerable groups, percentages are much higher, which is explained by worse living conditions. In these cases, the existence of chronic diseases occurs more often, and the consequences are evident when we look at the average age of members of certain populations (the average age of the Roma in Montenegro is 35.2

67

Map of Montenegro can be found in the Chapter 1.

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years68). This is as a result of at least two factors: a high birth rate and low living standards. Out of those who were sick, 74.3% of them consulted a doctor or visited a health institution (out of them, 40.7% were males and 59.3% were females). It is interesting to note that 12% of those who did not visit the doctor claimed that they were not able to go due to lack of financial resources, health insurance, or that there was no nearby health institution. A subjective estimate of the health status of these individuals shows that three quarters of participants thought that their health was either good or very good, whilst 9.2% considered their health to be either bad or very bad (Figure 5.4). If we compare this data among genders, we can conclude that more males consider that their health is either good or better than females. However, we have to stress that this is a subjective estimate of health status, and therefore we cannot explicitly conclude that males are healthier than females. The indicator of health status is 0.25. This indicator at an aggregate level shows the examinees’ estimate of their health status. It can give values between –0.50 and 0.50. As the indicator gets closer to –0.50 the worse the estimate of the health status, and as it gets closer to 0.50 the estimate gets better. A value of 0.50 means that examinees consider their health status to be very good. . Based on a subjective estimate of health status, it was concluded that there was a high correlation between the estimate of health status and the standard of living. Those with a higher standard of living had a better opinion of their health, than those with a lower standard of living. In addition to the correlation between living standards and subjective estimates of health conditions, a very important indicator is the correlation between the subjective estimate of the health condition and education. Education, which is measured by years in school, is positively correlated with the health of the population. The Household Survey showed that educated people contribute more to the overall health of the population since they have more knowledge. In fact, 74.6% participants who had at least a college degree considered their health condition to be good or very good. Amongst participants who had at least a high school qualifications, 69% were of the same opinion, whilst only 55.6% of those with, at most, Elementary school education shared this opinion. More educated people are better able to recognize the causes of a disease; moreover, they also know better how to prevent a disease. Almost all participants with college degrees (97.1%) had heard of genital deseases, whilst this percentage amongst those with only high school qualifications was 54.1%. In general, more educated people are more disciplined in 68

Source: Survey on revenue and household expenditure of Roma, refugees, and internaly displaced persons, ISSP and UNDP, 2003

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taking drugs. It is not only due to their awareness of the importance of taking drugs, but also due to the fact that more educated people are also wealthier and can therefore afford necesary drugs. In addition, more educated people are more physically active. In fact, 14.4% of participants with college degree exercised regularly, whilst 8.3% of those with high school qualifications and 5.4% of those with elementary school education exercised regularly as well. Almost 5% (4.4%) of the Montenegrin population is handicapped whilst around 9% of the population suffers from a chronic disease. Persons with lower living standards are more often absent from work than persons with higher living standards. Taking into account that those with lower standards of living stay at home only when they have to, it leads to the conclusion that they probably have a worse state of health than those with higher living standards. The structure of health insurance financing sources significantly depends on living standards. The majority of third, fourth and fifth quintiles are being insured by other household members whilst the majority of first and second quintiles obtain their health insurance through their employers. Therefore, the major share of participants who obtain health insurance from other household members are in the fifth quintile and amount to 42.7%. With the increase in living standards, this share has decreased and in the first quintile amounts to 26.7%. Regarding the share of individuals who obtain health insurance from their work, there is 13.7% in the fifth quintile whilst the complete opposite is the case in the first quintile where the proportion increases and more than half of those questioned (55.2%) had obtained health insurance from their work. Also in the second quintile, almost half of examinees (49.2%) have health insurance obtained from their own work. The reason for this correlation is the fact that in households with higher revenues, the majority of members work and therefore their insurance is obtained from their work. This can be partially explained by the fact that poor families have more children who are insured through other family members. The majority of participants insured through the Government insurance program are in the fifth quintile and amounts to 38.4%. The percentage of individuals who are insured by the Government program decreases towards the first quintile. In general, the share of private insurance is very low, but it is highly present within groups with a higher standard of living.69 From the total number of participants who visited a doctor or some medical institution,70 treatment expenses were covered by health insurance for 90.2%, 7.6% paid themselves, and 2.2% received payment from other person based in Montenegro whilst for 0.3% of participants treatment expenses were paid by a cousin or friend from abroad.

69 70

In fifth quintile only 0.1% of examinees have private protection. private insurance is in third quintile and amounts to 2%. This is related to examinees who have answered questions.

The majority of examinees with

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Regarding participants whose treatment wasn’t covered by health insurance, 41.2% were matters not covered by health insurance, 14.1% didn’t have health insurance, 38.0% felt that a private clinic was better and 6.7% paid for services because of some other reason. Data that showed that medicines were prescribed for 86.1% who visited a doctor indicated that a low number of patients visit a doctor in order to prevent something, whilst the majority of patients visit a doctor when a health problem already exists. From the total number of examinees to whom doctors prescribed medicines, 96.3% were prescribed medicines. Observed by region, the majority of examinees who received medicine from a public pharmacy lived in the northern region of Montenegro (66.3% versus 52.3% in central and 47.4% on southern regions). All examinees who were 18 or younger were prescribed medicine from public pharmacies; examinees younger than 10 years of age received medicine more often from private pharmacies (54.4%) whilst examinees from the ages of 11 to 18 more often received medicine from public pharmacies (68%). In other age groups, the majority of those who were not prescribed medicine (13.3%) were in the 31 to 40 year age group whilst the majority of those who did get it belonged to the over 60s group (62.5%). On the other hand, examinees in the 31 to 40 year age group, mostly received medicine from private pharmacies (56.1%). Examinees indicated that the main reason for getting medicines from private pharmacies was the lack of suitable medicines in public pharmacies. A small percentage of examinees had some other reason for making purchases in a private pharmacy.4.5% said that private pharmacies offered a better service whilst 2.3% said that a private pharmacy was closer i.e. more accessible). A lack of medicine in public pharmacies restricts access to health care for vulnerable groups. From the above mentioned it is clear that there are significant out of pocket payments. However there is neither any official data nor a micro study which reveals how much out of pocket payments are. 5.1.1.4.

Accessibility of health care to RAE and IDP

Insecure housing and living conditions, a poor understanding of health issues among the RAE71 and obstacles to access (lack of proper documentation) to the health care system lead to the poor health status of the RAE. The same stands for refugees and IDPs72 living in collective centres and elderly households. Aside from malnutrition, the RAE living in unofficial settlements, both in urban centres and rural areas, are usually not covered by either a water supply or sewage network and face improper waste disposal.

71 72

RAE- Roma, Ashkaelia and Egyptians IDP - Internally Displaced Persons

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Only 52% of surveyed RAE households73 had piped water inside the dwelling, while 34% had piped water in the garden/yard or used a public tap (18%). Less than two fifths of RAE households and 70% of refugee/IDP households had a kitchen inside the dwelling in which they lived. Amongst surveyed vulnerable groups, the majority of non-RAE households lived in proximity to the RAE used electricity for heating (almost 90%), whilst 80% of RAE and every fourth refugee/IDP household used wood fuel for heating which has health consequences attributable to indoor air pollution. ccording to the survey data, over the past 12 months, 8% of non-RAE households living in close proximity to the RAE, in comparison with 32% of refugee/IDP households and a high 62 percent of RAE reported situations when they could not afford to purchase prescribed medicines required for a member of their household. On average, the RAE spent around 85 EUR last year for healthcare in comparison with the €180 expenditure of the non-RAE population living in close proximity to the RAE and the almost €360 average household expenditure reported by refugee/IDP households. When compared to total monthly household, refugees and IDPs spent around 15% of their monthly household budget on medicines and medical services; the same figure for the RAE was 9% and 6% for non-RAE respondents living in close proximity to the RAE. If we attempt to justify higher absolute and relative healthcare costs amongst refugee/IDP households, we could look at the average age of respondents: the youngest are RAE (29 years old, on average), then those non-RAE respondents surveyed in close proximity to the RAE (33 years old), and the oldest, on average are refugee and IDP respondents (34 years old). When asked to evaluate their health today compared with the situation one year ago, 25 percent of RAE reported an increasingly worsened state of health, in comparison with 6 percent of non/RAE respondents living in close proximity to RAE and 19 percent of surveyed refugees/IDPs. The incidence of chronic illness is higher amongst refugees and IDPs (19%) which justifies a higher annual expenditure for healthcare, in comparison with 17%t of RAE and 10% of non-RAE respondents living in close proximity to RAE who report chronic illnesses. Over the past 12 months74, the most serious sicknesses encountered amongst respondents from all three sub-samples were colds and influenza with the most significant consequences occurring amongst RAE respondents who lost on average 40 days due to illness, in comparison with 16 days absence from normal activities for refugees and IDPs as well as non-RAE respondents living in close proximity to the RAE. Though sick and out of regular activity for more than 40 days on average during the past 12 months, only 40% of the RAE consulted a doctor; the same applies to 50% of refugees/IDPs and 60% of non-RAE respondents living in close proximity to the RAE. Only 26% of children under the age of 14 have been vaccinated against polio, diphtheria, tetanus and whooping cough: 17% of RAE, 35% of refugees and IDPs, and 73 74

The survey was conducted by the Center for Entrepreneurship and Economic Development in 2006 The survey was conducted in 2006.

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33% of non-RAE living in close proximity to the RAE75. Among those who are 0-14 years old and are not vaccinated against polio, diphtheria, tetanus and whooping cough, a small number responded to the question “why not?”. Amongst them, 43% of the RAE and 40% of refugees/IDPs had not done so because of a lack of medical identification documents. Also, 9% of refugees/IDPs, 7% of the RAE and 3% of the non-RAE population living in close proximity to the RAE reported that they had been denied medical services due to the lack of proper documents. 5.1.2.

Organization of the Health Care System

The existing network of public health institutions comprises eighteen healthcare centers, three health stations for smaller municipalities in Pluzine and Savnik that are organisationally linked to the healthcare centre in Niksic and the health station in Zabljak is linked to the healthcare centre in Pljevlja. In healthcare centres in Mojkovac, Plav, Pluzine, Rozaje, Savnik and Ulcinj, there are inpatient units. Hospital health care is provided in 7 general hospitals organised at regional levels, three special hospitals for the needs of the Republic and clinical centres as institutions providing tertiary level care. In the public health system, there is also the Institute of Public Health which is an important institution in the Republic. 5.1.2.1.

Public Health Infrastructure

The organization and financing of health protection has been based up to now on the dominating role of the public sector, both in the area of extension of services, and in the area of securing funds for health protection. However, over the last several years the participation of the private sector in the field of extension of health services has increased. The following institutions have been included into the organization and extension of health services: the Ministry of Health, the Fund for Health Insurance (earlier called Health Fund - HF), public health institutions and private health institutions. Private health institutions, although they are not integrated into the Montenegrin health system, increasingly participate in offering health services. In Montenegro in 2005, there were 173 different health care institutions in the private sector76. A particularly high share of the private sector is in general dental services (63 institutions which represent almost 40% of total private health care institutions). Observing certain fields which require the most sophisticated equipment and knowledge. It is evident that private health care institutions specialized in that field are located mainly in Podgorica (for example in vitro fertilization and dermatology). Apart from institutions that participate in the organization and extension of health services, there are also Medical and Pharmaceutical Chambers that have as an objective, as institutions within the Montenegrin Health System, the promotion of work conditions for medical doctors, dentistry and pharmacists, the protection of their professional interests, as well as promotion of quality health protection. 75 76

One should take care in interpreting this data since almost two third of respondents refused to answer or did not have any information about this item. Source: Institute for Health, Statistical yearbook, 2006.

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The number of hospital beds compared with other European countries is relatively small and in that Montenegro is lagging behind the European average. Individual comparisons show that Montenegro is ahead of Spain, Ireland, Italy, the Netherlands, Norway, Portugal and some others. During the last decade, a decreasing trend in the number of hospital beds was recorded in Europe because throughout the reform process, changes in secondary health care stationary capacities were decreased and redirected to ambulance care, strengthening primary health care and in house treatment. Comparing other parameters regarding hospital beds, it is possible to conclude that Montenegro has too much of this type of capacity. Apart from a low level of hospitalization of inhabitants (almost 40% below European average), average treatment duration isr 14% longer than the European average. Occupancy of hospital beds in active hospitals is only 58.5% which means that more than third of the capacity isn’t i.e. that there is no need for this if the hospital capacity work data is considered. The less frequently used hospital beds are in health centers and stations (56%), general hospitals Berane and Cetinje (below 60%), Special hospitals Dobrota-Kotor (48%) and with some departments of Clinical Centre (infective 5.5%, pulmology 31.9%, endocrinology 34.2%, rheumatology 45.2% and gynecology units). The use of pediatric departments in general hospitals is in average below 50% excluding the departments in Bijelo Polje and Kotor. A low level of hospital bed usage is also experienced in the gynecology departments of general hospitals where it is above 54% with exception of Niksic and Pljevlja. A fairly low usage is also recorded by the internal (????I don’t understand what you mean by internal department) department at Bijelo Polje (59%) and Berane (65%) and also in the surgical departments at Berane (57%) and Cetinje (62%). Data about hospital beds usage shows that it is necessary to rationalize organization, functioning and financing of hospitals in order to ensure a higher efficiency of this segment of health care. It is encumbering on decision makers in the health system at all levels to arrange for the transfer of patients in over used areas and to increase in other areas, in order to improve current conditions and to increase rationality to solve problems caused by insufficient financial resources, From the economy’s point of view, the current situation regarding hospital capacity usage isn’t sustainable. The problem isn’t only the availability of beds, as this is not caused by expenditure issues, but the fact that the allocation of beds is as a result of human resource planning and should properly looked into as it represents one of the main expenditures in the health care sector. Partially because of these reasons. a number of doctors in Montenegro are at the level of a developed country. Although this might seem encouraging, things are completely different if we consider service quality77. (please check all this para as it made very little sense and I have guessed a lot)

77

Source: Ministry of Health

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One of the basic indicators which can be used for the evaluation of the health care system changes is to ensure (this does not make sense) the population with health care human resources. Data for Montenegro is given in the annex of chapter 578. If we observe the number of doctors per one thousand inhabitants in a region, we notice that Montenegro is on a level with the regional average. This is shown in table 5.3 in the annex of this chapter79. It should be mentioned that in previous years, medical human resources have not been increased pro rata with number of inhabitants, beds or with the volume of other health care services. The structure of employees in health care institutions is shown in table 5.4, annex. In Podgorica in 1997, a Medical Faculty was opened, which was quite important for the improvement of the structure pf human resources in the area of health care. Opening the Faculty of Medical Studies meant that medical studies became more accessible to a higher percentage of the high school population. At the same time, the education and level of specialization of Montenegrian human resources returning from other countries is also improving and should increase the level of health care protection quality. Moreover, there is a significantly decreased brain drain, since most of the students who graduate in Podgorica choose to remain and work in Montenegro. There is no official study, but it seems that during the last ten years, the brain drain of health specialists has significantly decreased. Furthermore, a large number of Montenegrin students who have studied in Belgrade are now returning to Montenegro to work in specialized fields as the waiting lists to practise specialized areas are shorter in Montenegro that in Belgrade, and also graduate students are paid for performing work in specialized fields in Podgorica, whereas in Belgrade they are not. 5.1.2.2.

Financing of the Health Care System80

The public sector in Montenegro plays a key role in financing health care which relies on a mandatory principle. We can say that the Montenegrin health system belongs to the Bismarck health system model. The only institution responsible for compulsory health insurance is the Republic Health Insurance Fund which is based in Podgorica and has branches all over Montenegro. The founding of the Health Insurance Fund as the only responsible body for health insurance was the most rational solution due to the small number of people insured in Montenegro. The law on health insurance envisaged that voluntary insurance would also be the responsibility of the the Health Insurance Fund as it has to provide professional support to all types of health insurance. Because of that, professional development within the existing service of the Health Insurance Fund will be necessary. Revenue for mandatory health insurance is from: 78 79 80

Source: Institute for Health of Montenegro Source: Institute for Health of Montenegro In this part was used co-author paper: I.Vojinovic, M.Vukotic, ISSP, 2005.

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1. Contributions for mandatory health insurance. 1.1.. Contributions paid by employers for employees, the PIO fund for beneficiaries with pension rights and allowances based on remaining working ability, the central budget for employees in budget institutions and the unemployed from employment agency lists, the self-employed, legal entities, individuals and farmers whose contribution is calculated as 20% of the base81 estimated on land registry (cadastre) records for tax calculation purposes. 2. Budget resources (alongside the contribution of the budget finance part from the Institute for health activities which has an obligation to consign part of excise revenues)82; 3. Donations; 4. Resources received from conventions; 5. Damage refunds; 6. Interest rates, dividends, rents; 7. Other sources, according to the Law. Almost three quarters of total revenues come from health insurance contributions. In 2008, total planned Fund revenue was 24% higher 24% in comparison with the achievement in 2007 (€144.5 million). 5.1.2.3.

Health protection benefits

The basic package of health services currently includes the following items: (a) In primary health care: health status check-up; medical measures and procedures to improve the health status of the individual, including the implementation of preventive, therapeutic and rehabilitation measures; the provision of emergency medical aid, including ambulance transportation when necessary; treatment at the beneficiary's home; health care related to pregnancy and child delivery; prevention, treatment and remedy of oral and dental diseases; drugs included in the positive list of drugs. (b) In specialized and consultative health care (based upon referral from the selected PHC doctor): anamnesis and diagnosis of diseases and injuries; specialized therapeutic and rehabilitative procedures; prostheses and other appliances, auxiliary medical devices and materials and dental prosthetic devices, according to indications.

81 82

This base can’t be lower than two minimal net wages in the Republic for the month during which tax was paid. Because of a non-fulfilment of these obligations, the major part of it represents a burden for the Health fund.

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(c) In hospital health care (based upon referral from the previous levels): the diagnosis and treatment of diseases and injuries, rehabilitation services, nursing services, accommodation and catering for the hospitalized; drugs included in the positive list, as well as auxiliary materials; up to 30 days accommodation and catering for an escort of a hospitalized child of up to three years of age. Especially in the context of hospital care, insured individuals and their family members are entitled to reimbursement for travel and subsistence expenses (if necessary including a professional escort), the latter only applying, however, to cases when patients are required to use health care services outside their place of residence, for example for dialysis, or for sight, hearing or speech outpatient rehabilitation, or treatment abroad.

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5.1.2.4.

Health use

From total health care expenditures, 99% are Health Fund expenditures, while 1% is expenditure incurred by the Ministry of Health, the Medicine and Pharmaceutical Chambers and a part is for resources for the Institute for Health. Health fund expenditure is related to: 1. The provision of legally defined services (ambulance and dispensary services and stationary treatment in and out of Montenegro, prescribed medicines, medicines and medicine material in hospitals and health centers and etc) and they have share of 9095% 2. Investments, orthopedic instruments, refunds for illness, travel expenditures, daily allowances, resources for professional development, fund’s work and etc. The right to health care protection and the rights to standards, meaning health services in primary, secondary and at tertiary level. Observed by access levels, the highest expenditure is for primary health care protection and in past years it was around 40% (the projection for 2007 is 43.50%83). That service has been provided by health centers in Montenegro (ambulance services at a general medical level, special ambulance services, laboratory and dental services, medicine at health centers and prescribed medicines) whilst we can ignore the share for dental services in hospitals in the total overall expenditure for primary health protection (less than 1%). The share of secondary protection in total overall expenditure over the past years has been approximately 33%. Projections for 2007 are 30.94% which is a positive development because the increase of primary protection usage, along with decrease in secondary and tertiary protection was one of the reform goals. Expenditure related to hospital services (stationary and laboratory services, ambulance special services, RTG services, dialysis in hospitals, medicines in hospitals, etc.) Dialysis conducted in health centers (also part of secondary protection) represented 1% of secondary health protection. Tertiary health protection (stationary and laboratory services, ambulance special services, RTG services, dialysis in hospitals, medicines in hospitals etc.) represented a share between 7-8% of total expenditure while projections for 2007 are 7.96%. Other rights to health care (ambulance and stationary treatment outside Montenegro etc) represent 8% of total expenditure.

83

Source: Financial plan of sustainability of the health system in Montenegro from 2005-2007.

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Other health care rights as a result of insurance (orthopedic treatment and instruments, refund for illness, travel expenditures and daily allowances) are around 4%. Other expenditure (investments and development, professional development, Fund and Ministry working resources) equalled a total expenditure of around 7%. The previously stated facts are shown in the figure 5.2 in the annex. 5.1.2.5.

Coverage of the healthcare system and sustainability

As mentioned above, the health system follows model of social protection, in which employees contribute to a public health fund from which health protection is financed. This financing model presents a high taxation burden84 and cannot guarantee universal health care access because of the high number of unregistered employees, people out of the labour market and the increased informal economy. These schemes of protection cover employees and their household members who depend on them and also special groups like the retired, farmers and others. Coverage of the system is significant. From the total number questioned85 98.9% had health insurance. From the total number of those who had health insurance and who answered this question, health protection came from: their work (40.6%); other household members (36.3%); the Government insurance program (19.3%); private insurance (1.2%) other sources (2.6%). This is represented in the figure 5.5 in annex. The percentage of men whose health insurance comes from their work is significantly higher than the percentage in the female population (44.8% male against 36.1% female). Observed by age group, it can be confirmed that the highest percentage of people, whose protection comes from their work, are middle aged (from 41-60 years.). Namely, 60% of those questioned in the age range from 41 to 50 have health protection as a result of their own employment whilst same stands for 66% of those in the age from 51 to 60 years. Citizens over 60 years are mostly insured through the Government’s insurance program (29.9% of examinees older than 60 years are insured by this program). The same can be said for about 23% of participants in the age between 19-40 years whilst the same source is equal to about 15% in other age groups. Observed by gender, there was no high difference in participation among participants whose health insurance came from the Governmental program (18.6% male against 19.2% female). By region, this share was the highest in the central region (24.2%). None of those questioned over the age of 51 years had private insurance. Also from the total number of examinees between the ages of 19 and 30 years, 38.8% had insurance from another household member, 34.3% had insurance from their own work, and 84 85

As it was said, this is the reason that the Ministry of Finance has advocated a decrease in the rate of health contributions. The survey was conducted by ISSP in 2005.

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22.7% had it from the Government insurance program whilst 2.3% had their own private insurance. Participants who stated that they didn’t have health insurance and who gave reasons for this, indicated the following as the most important reasons: lack of proper documentation, unpaid tax, lack of bureau declaration and lack of interest. Compared with the average of 1.1 of participants who didn’t have health insurance, the figure for the same amongst Roma participants was 4.1%. Table 5.9 shows a review of basic indicators which follow the realization of health care financing reform goals. A high consumption of drugs and medical material which grew over previous years has been noticed. Expenditure on drugs and medical materials equal almost 30% of total of Health Fund expenditure which is significantly higher than in most countries.86 The health protection of refugees and displaced persons puts high pressure on the Health Fund budget because the fund does not receive any revenue from that area. Namely they are not insured by the fund and according to the Act for Displaced Persons,87 they have become the responsibility of the Government of Montenegro. Because of this, the Health Fund realized a €7.1 million deficit which had to be covered by donor program resources. The share of treatment expenditure for refugees and displaced persons is about 2% of the total expenditures of the fund. The health of vulnerable groups will be analyzed in more detail later. According to a new legal provision from 2005, the central Budget will be the source of health protection for refugees and displaced persons, financing and also capital health care expenditures according to a special provision and international agreements. This has increased health budget obligations from 200588. Observed by insurance category, the expenditure for the coverage of employees, pensioners and farmers grew much faster than expenditure designed for the health protection of the unemployed, refugees and internally displaced people. This was as a consequence of an expected employment growth, a growth in the number of farmers (stimulation measures in agriculture), an increase in pensioners whilst on the other hand, a decrease was expected in the number of refugees and in the number of internally displaced people along with a decrease in the unemployment rate. Planned expenditure for health in 2008 is €146.01 million from which €144.55 (99%) relates to Health Fund expenditure whilst the rest is related to financing public health i.e. part of the activities carried out by Institutes and the Ministry. Adapting the law on health insurance, whose provision came into force in July 2004, contribution rate for employees’ insurance have decreased by 5% since July 1st 2004 and by an additional 5% since December, 1st 2004. Currently, the contribution rate for health is 13.5%, 6.5% 86 87 88

Average in countries in the region is 18% The Official Gazette of the Republic of Montenegro 37/92 In 2005 health budget obligations increased for a 3%.

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of which is paid by employer and the rest by the employee. The Ministry of Finance has plans for a further decrease in this contribution rate, whilst the Fund’s representatives are against this measure as they think it would influence the financial sustainability of the system. Currently, it is one of the ongoing debates in the Montenegrin health system. 5.1.3.

Long-Term Care in Montenegro

Long term care in Montenegro was organized by the Ministry of Labour and Social affairs and the Ministry of Education, as well as by residential institutions, institutions which support the social and child protection sector. After independence, two Ministries merged, resulting in the fact that this part of social protection is now organized by the Ministry of Health, Labour and Social Affairs and also by the Ministry of Education. The Ministry of Health, Labour and Social Affairs has established five residential institutions, whilst three have been established by the Ministry of Education and Science. The institutions cover different aspects of child, youth and elderly protection89:

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•

Special Institution for Children and Youth - Podgorica was established in 1976. This institution accommodates moderately and severely retarded children and youth. The basic activity of the institution is care for children, health protection, as well as their upbringing, education and preparation for work.

•

PU90 Children Home “Mladost” – Bijela was established in 1946. Children without parents are accommodated in this institution. The basic activity of this institution is care, education and to prepare the children to be able to work. Children usually stay in this home until maturity, i.e. until they are ready for independent life.

•

Institution for the Education and Professional Rehabilitation of Children and Youth with Disabilities – Podgorica started in 1966. This institution takes care of the upbringing, education (pre-school, primary school), professional rehabilitation, social and medical protection of blind, children with physical disabilities and children with multiple disorders.

•

Institution for the Upbringing and Education of Children– Podgorica was established in 1965. The basic activities of this institution are accommodation, upbringing and education, professional enablement, socialization and re-socialization of children and youth with disorders in social behavior, as well as to prevent any assaults, in the sense of breaching common norms of behavior, undertaking of criminal acts, etc.

Conference – Social protection reform in Montenegro, 2001, J. Vuković – “Using rights on secondary school education and social integration of children from residential institutions in Montenegro” Stands for Public Institution

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•

PU Centar for Education and Work Enablement “1. jun” – Podgorica was established in 1976 and represents and institution which provides mentally retarded children and youth with pre-shool and primary education up to level II.91 .

•

Institution for the Education and Rehabilitation of Persons with Hearing and Speaking Disorders – Kotor was established in 1946. Accommodated in this institution are children with damaged hearing and a number of kids with multiple disorders. The basic activity of this institution is the accommodation of children, health and social protection, schooling and enabling for levels II and III..

•

PU Home for pensioners and other elderly persons “Grabovac” – Risan was established in 1947 and its role is to accommodate and assist elderly persons, whose families are not able to take care of them.

The total number of users of these institutions has been consistent over the past several years and is about 890 users. The highest number of users is in PU Home for pensioners and other elderly persons in “Grabovac” with about 300 users per year. This institution also has temporary users who come to stay for one or two days. The second biggest institution is the PU92 Children’s Home, “Mladost” – Bijela with an average number of 170 users. Like the PU Home for pensioners and other elderly persons in “Grabovac”, this institution has permanent residents. This institution also has a small school for its residents. The total number of users in all the institutions in this area is stable. The biggest number of users was in the year 2006, when the total number of users was 912. It is expected that over the following years, the number of users will grow, especially in the PU Home for pensioners and other elderly persons in “Grabovac”. Trends for longterm care are represented in the annex at the end of this chapter. Costs of services remained almost the same over the years and should remain stable over the following few years. This is indicated by the opening of some private LTC institutions, but those private institutions are still small and only have places for a maximum of 10 persons. Usually, a family, with the exception of court referrals, in which case the Ministry for Health, Labor and the Social Affairs covers all costs, covers the cost of staying in such institutions. Also, if the beneficiary or family’s funds are limited, costs are compensated by the MHLSW. The MHLSW and the Ministry have also set a guide for up to the full cost of accommodation to cover any difference between the amount provided by the family or beneficiary. The MHLSW, or republic budget, pays for staff costs in these institutions which it establishes, as well as utility expenses and building maintenance. For institutions that

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This level assumes primary school plus some specialist course. Stands for Public Institution

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have been established by the Ministry of Education, costs of personnel, utilities, and other educational aspects of the institution are covered by the Ministry. 5.2. 5.2.1.

Reforms of Health Care and Long-Term-Care System Public awareness and acceptance

The most important evaluation of the functioning of the health system is the service users’ opinion. An important health system’s quality indicator is the waiting time to admission in hospital. The majority of participants (57.7%) had spent up to an hour awaiting treatment; 34.6% had spent between 2 and 3 hours and 7.7% of examinees had spent more than 4 hours. The distance of health institutions is another essential indicator. More is presented in the figure 5.7 in the annex to this chapter. Observed by region, the northern part of country had majority of participants (15.3%) whose closest health institution was more than 5 km away. In the central region, a health institution was more than 5km away for 14.4% of examinees whilst in the southern region, less than 10% of examinees lived more than 5km away from a health institution. Satisfaction from visits to a doctor was very high. From the total number of persons who visited a doctor 25.5% were very satisfied, 42.4% were satisfied, 20.1% neither satisfied nor unsatisfied, whilst 8.6% weren’t satisfied and 3.4% were very dissatisfied. The satisfaction indicator for visits to the doctor was 0.19. This indicator aggregates participants’ satisfaction from visiting a doctor. The value of the indicator in this case is an interval from -0.50 to 0.50. As the indicator gets closer to –0.50 participants weren’t satisfied with their visit to a doctor whereas when the indicator gets closer to 0.50 examinees were satisfied with their visit to a doctor. Participants who were not satisfied with their visit, mainly complained of long waiting times and unclear explanations i.e. not enough explained about the medical treatment by medical staff. Participants stated that shorter waiting times, better availability of medicines, better treatment of patients and lower participation in total costs were ways to improve health protection. Government health system reforms have satisfied 6.7% of participants; partially satisfied 27.4%; could have been better for 33.0%; haven’t satisfied 8.4% and 24.6% don’t have any opinion either way about them. Montenegrin citizens receive information about health protection mostly through the media, from family or friends and from doctors.

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5.2.1.1.

The position of the state on the health care market and further action for the improvement of the quality of the healthcare system

If one wants to determine the quality of the healthcare system, the aforementioned survey can be used to justify users’ opinions. Here we would like to stress our opinion that there is a difference between the quality of services in private and in state health institutions. In the private sector, waiting times as well as the condition of institutions, are better than in state owned health institutions. Generally speaking, the quality of physicians is about the same, since the same physicians work in both the private and state sectors. However, the variety of services and medical equipment is much higher in state owned hospitals, dominated by the General Hospital in Podgorica. Many surgeries and interventions cannot be performed in the private sector. Therefore, state hospitals are still dominating the health system. In the following lines we will describe actions that are being performed in order to improve the quality of the healthcare system. The main line of action for the further development of the Montenegrin health system has been defined in the Master Plan for Health Care and Development in Montenegro until 2010, and in the Strategy of Health care Development Plan until 2020. Political will is a precondition for successful health system reform. That is the precise aim of these documents. The plans show political character because political concordance for resources and decision making regarding the status of the health system is required. Namely, health care development can create a conscious decision to provide more or less GDP resources or to differently priorities aims and tasks, to define their terms of realization , to define solidarity and social relation differently or to change the health system’s mode of organization and finance. Because of that, every health care plan has its own measures and own political dimension. It results from the fact that the health system is part of the social system and can only perform within its frameworks and in interdependence with other private and social movements and development trends. The health sector is not an expenditure but an investment in the overall social and economic development of society. The development of health care cannot be relinquished to the ambition and agility of certain service providers groups or market laws but should be oriented towards social needs. Demand and supply laws which are characteristics of market activities aren’t fully acceptable and can’t fully function within the health care system. If health care development is relinquished only to services providers i.e. a misbalance in supply could be created resulting in some service supplies being high whilst others would be low. It could happen that certain programs would not be interesting for service providers (health institutions) because of financial or other reasons. Also it could happen that preventative services, house visits, transfusions, pathology, social medicine and some other activities might not be provided at all whilst the supply of other services with a greater interest for health professionals might be tremendous. The majority of needs could never be either fulfilled or unfulfilled with unacceptable conditions. Because of

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that, health care improvement, citizens’ satisfaction and the success of the health care system overall might not be achievable. A good health care system must ensure the satisfaction of needs in all areas of medicine, depending on the population’s health condition. In the public health system, ensuring the development of and the supply of services in health care areas, is the task and obligation of the state. The state must take care of resources (human, physical location and equipment) through which, services should be provided at a level of availability which represents identified and specially defined needs equally within the whole territory and also to the total population. Because of that, it should take care of needs which reflect on the health condition of the population and also regarding possibilities about financing them. All needs cannot be satisfied by society, that’s why at the planning stage, health care system priorities must be set. In line with that principle, all areas will have an opportunity to fulfil the required needs, and those who expect better expected results will get better development opportunities. That’s why a plan is a document and a regulation instrument of complicated interrelations between needs, interests and development opportunities as well as stating health activities and health insurance performance within health care regulations. Planning shouldn’t be understood as the negation of certain economic laws in health care, but more as a request that management, organization and the function of health care and health insurance should remain under public control. The purpose of healthcare planning is to: - provide conditions for better health and the satisfactory functioning of the health care system, - set priorities in health care programs with an orientation towards prevention, early diagnosis and treatment of diseases in vulnerable groups, - develop primary health care, - define resources to achieve complete health care. In public health care systems, the principles of comprehensiveness, solidarity, equality, non-discrimination and non-profitability and democratic decision-making about most important issues in health care are applied. According to these principles, public i.e. the state health care system, must provide treatment refunds, i.e. access of health care rights, regardless of income, age, gender, ethnic, religion, health condition or other differences. The equality of citizens, who are included in the system (nondiscrimination), is valid for health insurance rights, accessibility to health services and their quality and equality of treatment, of health services and insurance. All of these have to be based on solidarity between the rich and the poor, the young and the old, the diseased and those in good health, where solidarity means equal rights and obligations of health insurance, according to the income of an individual i.e. his family and equal rights.

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According to these principles, which are included in the health care and health insurance laws, health care will become the public and common good of society. Health care is being provided to citizens, and therefore the kind of health service to be provided and the allocation of financial resources, must take into account the number of citizens, their age and gender structure, expected trends, population by territory, health conditions and evaluated present and future needs, as well as the economic power of society and the ability of financing by the health care system. Another significant factor is the capacity for development of health institutions, their organization, professional expertise, equipment, mode of payment and other factors. According to these indicators and parameters, the plan anticipates frameworks, priorities and opportunities for the development of the future health care system and the realization of citizens’ rights on health care. 5.3.

Conclusion and Challenges

Some of the most important problems in the Montenegrin health system are: excess public and total expenditures, undeveloped health care control and improvement quality systems, the non existence of a qualitative health information system or other better management mechanism. Primary health care doesn’t play an important role in prevention, detection and treatment; employees in the health sector have small salaries; public hospital and health centre networks are inefficient; medicine prices are significantly above international standards. Finally, the existence of tremendous informal payments which finance the irregular private sector should be emphasized. A significant number of actions and strategies proposed, by the Montenegrin government, indicate the Government’s readiness to improve the legislative framework in order to promote a universal approach to qualitative health care for all citizens. A challenge for the Government is to redirect its own and quite large public expenditure for health care in order to increase its own resource management capacities and increase the efficiency of the health care system. The citizen’s poll survey indicated dissatisfaction with the quality of health care services and conditions under which those services are provided especially in hospitals. The main reason for the reduction in quality of public sector services hasn’t been caused just by poor investments in this sector, but by the drain of doctors from the public to the private sector. Another problem is that many private health centres aren’t registered and don’t even report full profits which increases the size of the informal economy. This especially true for dental health centres. The reform process should devote special attention to this problem and enforce the legalization of this sector. The area of medicines requires improvements in efficiency because if such growth trends continue over the next few years, it will be difficult to provide resources to finance them. This could be done in a number of ways such as improving pharmacy services and reorganizing the pharmacy information system. Reorganization of the information system would allow the tracking of expenditure and the distribution of

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medicine,, the recruitment of a pharmacy information system with the aim of following consumption and medicine distribution, chosen doctor institution implementation (part of health reforms) in order to have precise medical prescriptions and Health Fund referent prices. That would make a saving of 30% (€7.5 million) in comparison with existing expenditure for medicine. It is necessary to reorganize and rationalize health sector human resources. The public health system, by end of 2003 had 7251 employees. Medical workers represented 74.46 % whilst non-medical workers represented 25.54% of total health care sector employees. The medical to non-medical working ratio was not satisfactory compared with standards of other health care systems. One employed doctor had to care for 520 inhabitants whilst one doctor in primary care had to deal with 1023 citizens. The number of citizens per one dentist is 2263 and to pharmacists is 6570. Finally, recommendations for the realization of health care system reform goals are given in the follow up. They are given, bearing in mind the increase of accessibility, quality and sustainability of the healthcare system. Primary health care reform extension: Primary health care is the most readily available type of care for the population. It follows their health, studies factors which influence on health and provides prevention and treatment for which more sophisticated technology or specialized knowledge and experience aren’t required. At the same time, primary health care is at the base of the health care pyramid, on which specialized secondary and tertiary services have been upgrading and supplementing their own tasks, solving more complicated health needs. Primary health care is the “gatekeeper” for citizens to enter the health system and pass through to higher levels for those with a real need for complicated diagnostics and therapies which are more expensive than those found in primary health care services. Good organization of health care activities gives priority to primary health care, which contributes to the overall efficiency of the health care system. During the first phase of primary health care reforms, chosen doctor institutions were introduced. These are the main providers of preventative programs and planned priority tasks for the improvement of health conditions. At the same time, health centers will introduce health strengthening units and develop children’s ambulances. Therefore, this will make health centers the main health care providers for certain population groups i.e. the overall population. Health centre changes will gradually correct the development of disproportions which have, to date, been a problem in health care development. The development of priorities in the orientation of primary health care won’t contribute to an increase in capacity at health centres i.e. an increase in chosen doctors . Employment will be adjusted to be in keeping with the norm for human resources in this activity, whilst health centres, which are mostly understaffed, will be given the highest priority. Universal health care approach – Higher attention should be given to private sector payments. They are currently quite high and they are also present in such quantities that

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affect access to health care for a large number of citizens. Cost control measures taken in most countries have shown financial risk increases for services providers and for patients. And if that risk is not neutralized with increased productivity, it is quite possible that vulnerable groups will be most affected. Therefore, monitoring of the influence of reform measures on household consumption should be introduced. Monitoring should help to identify problems and suggest solutions. This is in line with the EU objective of access for all to adequate health and long-term care. Private and public sector connection - Special attention during the reform process should be given to the private sector. As stated, large informal payments have been transferred to this currently unregulated sector. The problem cannot be solved by making contracts regarding the provision of health services with those insured by the Fund. The existing problem would be solved if: patients who paid health insurance used private sector services because the public sector isn’t efficient enough to provide a satisfactory service on time. That might be a transitory step before the introduction of a voluntary health insurance system. Promoting Patient Choice through Private Voluntary Health Insurance – A very important aspect of health care reform is the introduction of private health insurance. That would definitely improve the situation in this sector and contribute to the increase in quality in health services on one side and the reduction in expenditure on the other. The current system, which depends on tax and other contributions, weighs heavily on the labour force and the overall economy. Improvement in quality and efficiency through intervention on the supply side-the Government as owner of the main part of the network of health services providers, should initiate at least two initiatives in order to address inefficiencies in current health services system. The first would be to make hospitals more efficient in order to increase the quality of health services as well as to make hospital services and staff more efficient, in order to adjust to a varied and irregular profile of population. This reform would also imply specialized centres merging, in order to achieve economies of scale. The second initiative is the decentralization of primary and secondary health care i.e. the transfer of responsibility to local governments. Access to health and vulnerable groups - Housing conditions seem to be a key source of poor health for the RAE, although they have built up a certain level of natural protection to various diseases in the environment. A priority in terms of improving the health conditions of the RAE would be to provide them with designated legal housing with improved sewerage and water supply systems to help mitigate health risks. Although they report higher incidences of illness, fewer RAE utilize health services than their non-RAE neighbours or refugees and IDPs. This might be due to the freedom they have to be ill and stay at home, not working, or due to the lack of information and knowledge about preventive health care which calls for immediate action in terms of scaled-up immunization, preventive child health care and raised awareness among the RAE population most at risk.

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As in other countries in the region, Montenegro is facing a high incidence of out-ofpocket payments for health care services, whether people are insured or not. Such a practice has a disproportionately negative effect on the very poor and is likely to prevent them from accessing health services in many instances. Ensuring transparent and free of charge access for uninsured poor and vulnerable groups contributes to promoting RAE access to health care. In addition, on-going health system reforms in Montenegro promote the concept of a family doctor, adding greater importance to the practice of those doctors who treat ethnic minorities and vulnerable groups, and which will put the RAE in Montenegro in a slightly better position for the future. Additional support of private capital entrance in health area: Alongside current private institutions, the inclusion in health care and the encouragement of additional private capital into the health area should be made; it doesn’t only mean new investments but also the privatization of certain public institutions. Inclusion of non-health government departments in the health system reform: Part of the reform regarding respect towards health is very relevant. Better health conditions cannot be achieved if only the health service takes care of this. Therefore, it is necessary to plan some measures outside the health care system. Health is not created in hospitals, heath centers and pharmacies, but these institutions serve to prevent and treat illnesses that have developed in the social and natural environment where people live and work. The health service doesn’t have any impact on environmental factors that impact on health conditions, but these factors have an influence on the population. Health care can’t solve environmental problems such as pollution, traffic safety, work safety, the provision of residential accommodation, employment, education, social problems and a solution to poverty, alcoholism and other addictive illnesses. All these factors play an important role and have an influence on health. Therefore, better health and a higher quality of life isn’t just the jurisdiction of Ministry of Health, but also of other departments i.e. Government and Parliament. Inclusion of the Ministry of Education in the process of the health system reform: By including health education in primary schools and high schools as special subject and/or within other subjects, children and teenagers (and their parents indirectly) will adopt a basic knowledge of a healthy way of living, personal hygiene, health nutrition, necessary physical activities, prevention of illnesses and injuries, sexual education, addiction illnesses (alcoholism, drugs, smoking) and their negative consequences etc. The second mission of this department is to increase the general level of education and literacy as it has been found that uneducated persons take less care of their health than those who are educated. Inclusion of the Ministry of Transport, Maritime and Telecommunications in the health system reform process: Enacting of rules and obligations for cyclists and motorcyclists (and their co-riders especially children) about protection, use of helmets, the obligatory usage of safety belts for all passengers in cars and linear buses, the limitation of carbon monoxide in deflated car gases, the limitation of alcohol allowed fro drivers, the prohibition of driving for people who are under the influence of drugs etc. Besides that, the Ministry of Health will insist on stricter control and sanctions for the breach of

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traffic rules, which could, in itself, decrease the number of incidents and health insurance expenditures and might contribute to health improvement. It will be suggested that insurance companies should not accept expenditure claims from those who have not obeyed safety rules in traffic accidents. Education of citizens should be also implemented in order to inform citizens about the consequences of their own health decisions. Development of the health care information system: Health care Information Systems – HIS represents one of the basic components in modern health care systems. With the increase in health care expenditure, there is an increased need for overall productivity quality. The organizational structure of health care includes different subjects. Every subject should develop its own information system which could be projected to satisfy internal needs, as well as the needs of other institutions with which that subject is connected. The current trend in this area is mostly based on two strategies: 1.

Connecting of all local information systems into one integral health information system and

2.

Developing and improving the quality of information services within each health area.

A modern HIS should also provide the following services: 1. Updating all resources and conditions, 2. Registration of patients with all social identifiers, 3. Treatment of patients including stationary and ambulant patients, 4. Statistics, reports and all other conventional and unconventional information, 5. Archive documents in correlation with relevant law legislation and standards, 6. Access to all scientific, clinical and other accomplishments in medical areas that are archived in electronic form and 7. Interconnection and compatibility with similar systems in the country and abroad93.

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These activities are precisely defined in the Strategy of Development for Information in Society – the way to society through knowledge, the Government of Montenegro.

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5.5.1. Monitoring of Health System Reform In order to successfully monitor the reform process and measure its success indicators for reform, monitoring should be created i.e. three components of reform: 1) improvement of the financial sustainability of the health system through an institutional framework, the improvement and creation of an information system for health policy, planning, regulation and management conduction in Ministry of Health and Health Insurance Fund; 2) the increase in quality, efficiency and availability of primary health care, including medicines that are issued solely by receipt; 3) the improvement of services for the older population as well as for people with long-term mental problems in primary health care. Basic indicators that should be followed during the next four years (2005-2008) in Montenegro, which will measure the success of implemented reforms, can be categorized in seven basic groups: 1. Price decrease of medicines issued solely by receipt 2. Decrease of Health Insurance Fund deficit 3. Decrease of waiting time for treatment in primary health care 4. Increase of usage and satisfaction with primary health care by the Roma population and internally displaced persons 5. Decrease of difference in primary health care usage between rich and poor people 6. Preservation or improvement of immunization rate against measles and DPT 7. Increase of daily services usage by older people. Concerning indicators that are related to the first and third components and actions that should be implemented, the responsibility is mainly on the shoulders of the Ministry of Health and other health system institutions. For the monitoring of heath indicators from the second component, it will be necessary to involve institutions that are outside of the health system. The most important activities or sub-indicators that should be followed are: 1) the prolongation of consultancy duration in primary health care; 2) the increase in patients who schedule primary health care treatments; 3) the increase in patients in Podgorica who have chosen their personal doctor; 4) the increase in service satisfaction with primary health care; 5) the increase in the share of primary health care consultancies within the total number of consultancies; 6) the decrease in the number of laboratory finds that are never returned to the patient; 7) the number of patients who have chosen their personal doctor outside of Podgorica. Finally, as mentioned, it is necessary to conduct detailed research in order to identify out of pocket costs and their relationship with the insurance taken by citizens.

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Montenegro has begun a comprehensive reform of its health system, which is a heritage of the Socialistic Federal Republic of Yugoslavia. According to health indicators, Montenegro is at the same level as other countries within the region, but is noticeably behind the developed European countries. Health capacity indicators are often on a level with European countries, but there is distinction when it comes to service quality. The first phase of the health system reform is related to primary health care development in order to decrease expenditure for secondary and tertiary care. This is in line with the EU objective of changing habits with respect to healthcare and long-term care. In addition, this reform includes a change in doctors’ attitude and increase of their responsibility. The share of public expenditure for the health system in total costs decreased from 100% in 1990 to 87% in 2005. Overall, sustainable health financing will need to be secured, including adequate funding for public health services; population based preventive programs and capital investments. Another challenge is the decentralization process which is at a very early stage. So far, the quality of the information system has not sufficiently supported this process. Even though the system and ongoing reforms are promoting universal access, as well as equality for all citizens, long waiting times, as well as the availability of some services and drugs only in private sector, are restricting access to health care for vulnerable groups. The most important measures in further reform are: further development of primary health care, private and public sector connection, the introduction of voluntary health insurance, supply side intervention improvements, encouraging the entrance of additional private capital, as well as the development of the health care information system.

128

5.4.

References for the Chapter 5 1. Montenegrin National Institute for Health –Statistical Yearbook, 2002-2006. 2. MONSTAT, (1990-2007) Republic of Montenegro, Statistical Yearbook 3. Ministry for Health, National Strategy for the Development of Health Care 4. Ministry for Health, National Strategy for implementation of the ICT in health area 5. Ministry for Health, Master plan of healthcare system development 6. Montenegrin Health Fund- Statistical Information

Web sites: 1. Bureau for Economic Analysis - http://www.bea.gov 2. Bureau of Labour Statistics - http://www.bls.gov 3. Center for European Policy Studies - http://www.ceps.be 4. Central Intelegence Agency - http://www.cia.gov 5. Eurostat - http://www.eurostat.org 6. International Monetary Fund - http://www.imf.org 7. International Society for New Institutional Economics - http://www.isnie.org 8. Institute for Strategic Studies and Prognoses - http://www.isspm.org 9. Institute for Public Health - http://www.izj.cg.yu 10. Ministry

of

Health

Labor

and

Social

welfare

-

http://www.mzdravlja.vlada.cg.yu

129

11. Organisation

for

Economic

Cooperation

and

Development

-

http://www.oecd.org 12. Health Insurance Fund - http://www.rfzcg.cg.yu 13. Estonian Ministry of Social Affaires - http://www.sm.ee – 14. Statistics Estonia - http://www.stat.ee – 15. World Health Organisation - http://www.who.org 16. Vienna Institute for International Economic Studies - http://www.wiiw.at 17. World Bank - http://www.worldbank.org

130

5.5.

Statistical Annex for Chapter 5

Table 5.1: Demographic, vital and some health indicators in Montenegro 1991 2004 Area km2 13.812 13.812 Population places Municipalities 21 21 Population per 1km2 44.5 44.9 Population Total 615035 620533 Male 305931 Female 309104 Urban Rural 0-9 age 103121 10-19 age 103119 20-64 age 351972 65+ 50603 Female 15-49 150676 Female 15 + 230381 Vital indicators Natality per 1.000 16.5 12.6 Mortality per 1.000 population 6.8 9.2 Natural increase per 1.000 population 9.7 3.5 Infant mortality per 1.000 live births 11.1 7.8 Maternal mortality

2005 13.812

2006 13.812

21 45.13

21 45.2

623278

624240

11.8 9.4 2.4 9.5

12.1 9.6 2.5 11

Health care personnel Physicians Dentists Pharmacists Health care personnel with higher level qualification Health care personnel with mid

1191 269 98

1203 272 104

222 3673

224 3781

Number of population per one: Physician Dentist Pharmacist

521.02 2306.8 6331.9

518.1 2291.5 5993.1

Source: Health Statistical Yearbook 2006, Institute for Public Health

131

Table 5.2: Morbidity and mortality indicators,2004, 2005, 2006 2004 SDR, diseases of the circulatory system per 100 000 16.44 SDR, malignant neoplasm’s per 100 000 Tuberculosis incidence per 100 000 9.9 SDR external causes of injury and poisoning per 100 000 32.21 Clinically diagnosed AIDS incidence per 100 000 0.15 Cancer incidence per 100 000 2.7 New HIV infections reported per 100 000 0.15

2005 17.07

Source: Health Statistical Yearbook 2006, Institute for Public Health

27.4

2006

0.32

34.38 0.53 4.82 0.53

Table 5.3: Hospital beds per 1000 citizens in Europe and Montenegro Hospital beds per Utilization of Average stay 1000 citizens hospital beds* in hospitals* Europe European Union Montenegro Comparison

7,29 6,19 4,0 64,6

80,2 77,1 58,5 65,1

9,23 6,99 7,97 114,0

Source: Health for all Database 2004, European offices of World health organization, Copenhagen, 2004

132

Table 5.4: Daily hospitals, personnel and beds, in Montenegro in 2004, 2005 i 2006

217 29 30 22 28 38 19 18 184 14 12 22 48 6 378

25

1 4 236

305

232

546 1191

401 845

1 1 1

2

1022 132 180 112 87 146 109 78 837 63 76 82 221 41 1652

308 41 40 37 33 48 28 28 255 18 13 26 57 7 556

223 31 29 22 27 35 19 18 181 16 11 21 48 6 378

1 4 234

1

7

1058

312

229

25 269

8 98

1859 3985

563 1203

404 848

2 2 1 7 1

Source: Health Statistical Yearbook 2006, Institute for Public Health

28

1 1 1

326 42 47 40 35 47 30 29 270 17 12 26 55 7 549

244 31 32 23 26 35 20 20 187 17 12 21 50 6 377

1 4 225

1 41 3

1

8

1034

325

237

1

8

1030

28 272

9 104

1868 4005

596 1231

431 880

29 264

18 116

1895 4027

2 8 1

11 1

Health personnel with higher and mid-level qualification

3

1016 129 181 115 86 145 110 86 852 29 74 79 182 42 1705

2 2

29

Pharmacists

Dentists

Specialists

Physicians, total

Health personnel with higher and mid-level qualification

2006 Pharmacists

Dentists

Specialists

Physicians, total

Pharmacists

Dentists

Specialists

299 38 40 35 34 49 23 28 247 17 14 27 58 7 557

2005 Health personnel with higher and mid-level qualification

DAILY HOSPITALS IN: Clinical Centre of Montenegro Podgorica General Hospital Bar General Hospital Berane General Hospital Bijelo Polje General Hospital Kotor General Hospital Niksic General Hospital Pljevlja General Hospital Cetinje Total General hospitals Special Hospital Brezovik Special Hospital Dobrota Special Hospital Risan Total Special hospitals Total Health Stations Total Health Centre Total general and special hospitals General hospitals, Clinical Centre of Montenegro Total Montenegro

Physicians, total

2004

2 2 2 7 1 1

1041 123 190 112 87 142 118 82 854 16 72 88 176 1699

133

Table 5.5: Health personnel and beds in special hospitals (long term care) on secondary level in Montenegro in 2004, 2005 and 2006 Special hospital Special hospital for for orthopaedics pulmonary and .diseases and TB - traumathology in Neuropsychiatry Brezovik Risan hospitals-Dobrota

HOSPITALS-CENTERS Total Physicians Specialist

Health personnel with higher and mid-level qualification

Total

Per 1 physician

Total Beds Per 1 physician

2004

14

22

16

2005

15

22

13

2006

15

19

12

2004

13

18

12

2005

13

18

11

2006 2004

14 47

15 58

12 66

2005

57

58

72

2006

57

57

69

2004

47

58

66

2005

57

58

72

2006

57

57

69

2004

141

303

178

2005

141

178

303

2006 2004

141 141

178 303

257 178

2005

141

178

303

2006

141

178

257

Source: Health Statistical Yearbook 2006, Institute for Public Health

Table 5.6: Number of patients, average length of stays and bed occupancy in rehabilitation centres Treated patients

Utilized bed-days

Bed occupancy

HOSPITALSCENTERS

2004

2005

2006

2004

2005

2006

2004

2005

2006

Special hospital for pulmonary diseases and TB - Brezovik

2283

2143

2219

58300

53827

52792

113.28

104.59

102.58

Special hospital for orthopaedics and traumathology-Risan

2313

2027

2304

35844

33717

35814

55.17

51.9

55.12

Neuropsychiatry hospital-Dobrota

639

571

1044

86961

83699

85350

78.63

75.68

90.99

Source: Health Statistical Yearbook 2006, Institute for Public Health

134

Figure 5.1: Structure of the revenues of the Fund for health insurance (2006)

0%

3% 2% 2%

21% 72%

Employed

Retired

Agricultural workers

Source: Health Insurance Fund

Figure 5.2: Participation of the level of health security in total expenditures

8%

4%

7% 40%

8% 33%

Primary health care Secundary health care Tertiary health care Other rights from the health car e

Source: Health Insurance Fund

Figure 5.3: Expenditures of the Fund for health insurance by the type of insured (mil€) 60

Employed

50 40

Pensioners

30

Agricultural workers

20 Unemployed

10 0 2001

2002

2003

2004

Refuges and internally evacuated persons

Source: Health Insurance Fund

135

Figure 5.4: Subjestive assessment of health

Table 5.7: Main indicators for the following realization of reform goals Description Expenditures for drugs and medical materials by insured94 (€) Expenditures for drugs given on the recipes by insured (€) Number of doctors

2000

2001

2002

2003

2004

2005

19,70

34,28

41,14

44,02

42,68

56,48

9,58

16,60

21,71

18,72

15,47

18,34

1198

1189

1179

1139

1139

-

Expenditures of health care by the 44.257,97 doctor (€) Expenditures for health care and other rights from health insurance 86,53 by insured (€) Total expenditures for health by 94,77 insured (€)

60.246,75

71.830,84 76.453,03 82.300,26

-

116,44

137,12

140,42

150,91

173,19

123,54

149,10

157,38

169,29

182,90

Source: Health Insurance Fund, ISSP calculations

Table 5.8: Expenditures on drugs in the period 2000-2005 (mil €)

Drugs given on recipes Drugs and medical materials used in hospitals Drugs and medical materials used in health centres TOTAL:

2000

2001

2002

2003

2004

2005

5.87

10.21

13.41

11.61

9.61

10.92

4.13

8.85

9.9

11.22

12.08

15.25

2.07

2.03

2.1

4.47

4.82

3.88

12.07

21.09

25.41

27.30

26.51

30.05

Source: Health Insurance Fund

94

Fund gives this data by insured, not by citizen. The difference is 2-3%.

136

Table 5.9: Expenditures of treatment of refuges and evacuated people (mil €)95

Refuges Evacuated people TOTAL

2000

2001

2002

2003

2004

2005

0.42 1.27 1.69

0.74 1.5 2.24

0.86 1.21 2.07

0.84 1.16 2.00

0.90 1.24 2.14

0.53 1.52 2.05

Source: Health Insurance Fund

Figure 5.5: Source of health insurance of questioned

1.2% 19.3%

2.6% 36.3%

40.6%

Second member of household

Own employment

Government program of insurance

Private insurance

Other

Source: ISSP Household Survey 2004

Figure 5.6: Structure of the place of procurement of drugs

3.8% 40.4% 55.8%

State pharamacy

Private pharmacy

Did not managed to find drugs

Source: ISSP Household Survey 2004

95

Source: Fund of health care

137

Figure 5.7: Distance of health institution

8.8%

14.2%

37.8%

39.3%

Less then 1km

1-3 km

3-5 km

More than 5km

Source: ISSP Household Survey 2004

Figure 5.8: Dynamics of main health indicators

Source: Health Statistical Yearbook 2006, Institute for Public Health

Figure 5.9: Percentage of above 65 years old in the total population

Source: MONSTAT, Statistical Yearbook, 2007

138

Table 5.10: Expenditures of the Health Insurance Fund depending of the type of insurance Expenditures of the Fund by the type of insurance (mil € )

2001

2002

2003

2004

Employed Pensioners Agricultural workers Unemployed Refuges and internally evacuated persons Other

35,90 24,47 2,36 10,00 2,25 1,02

42,29 30,40 2,78 11,30 2,07 3,25

45,19 29,89 2,65 11,33 2,00 6,53

48,66 32,14 2,82 12,30 2,16 7,08

TOTAL

76,00

92,09

97,59

105,16

Source: Health Insurance Fund

Figure 5.10: Structure of the source of health care insurance by quintiles

Source: ISSP Household Survey 2004

Figure 5.11: Perception of health status by municipalities

139

Source: ISSP Household Survey 2004

Table 5.11: Overview of Institution Budget Resources Institution

Cost for accommodation by beneficiary

Number of users 2004

Number of users 2007

115€ if referred by CSW, 250€ if self or family placement 128 € 88 €

298

290

172 86

180 130

69 €

70

77

115 € 69 €

139 28

137 28

69 €

77

77

PU Home for pensioners and other elderly persons “Grabovac” PU96 Children Home “Mladost” Institution for Education and Rehabilitation of Persons with Hearing and Speaking Disorder Institution for Education and Professional Rehabilitation of Children and Youth with Disabilities Special Institution for Children and Youth Institution for Upbringing and Education of Children PU Center for Education and Work Enabling “1. jun” Resort “Becici”

10€ for MOP beneficiaries

Source: Ministry of Health, Labour and Social Welfare

Table 5.12: Total number of users in special institutions PU Home for pensioners and other elderly persons “Grabovac”

Children Home “Mladost”

Institution for Education and Rehabilitation of Persons with Hearing and Speaking Disorder

Institution for Education and Professional Rehabilitation of Children and Youth with Disabilities

Special Institution for Children and Youth

PU Centre for Education and Work Enabling “1. jun”

2007

290

180

130

77

137

77

2006 2005 2004

313 298 301

168 175 165

129 130 128

78 77 75

145 140 132

79 75 76

Source: Ministry of Health, Labour and Social Welfare

96

Stand for Public Institution

140

Figure 5.11: Total number of users in special institutions Total Number of users 920 910 900 890 880 870 860 850 2004

2005

2006

2007

Source: Ministry of Health, Labour and Social Welfare

Figure 5.12: Total Users of special institutions per year and institution 350 300 250 2007 2006 2005 2004

200 150 100 50 0 PU Home for Children Home pensioners and “Mladost” other elderly persons “Grabovac”

Institution for Education and Rehabilitation of Persons with Hearing and Speaking Disorder

Institution for Special Education and Institution for Professional Children and Rehabilitation Youth of Children and Youth with Disabilities

PU Center for Education and Work Enabling “1. jun”

Source: Ministry of Health, Labour and Social Welfare

141

6. 6.1.

Chapter 6. Conclusions and Future Challenges Conclusions

The Study on Social Protection and Social Inclusion in Montenegro gives an analysis of the main trends in social protection, indicators of poverty and social exclusion, pension, health and long-term care systems, with a particular emphasis on social exclusion. This chapter gives an overview of some key findings. The system of social protection includes a dispersed network of Centres for Social Work, which are present in all municipalities, either as Centre or Service for Social Work. However, there is an imbalance between skills and human resources. Also, the system is more focused on monetary transfers and institutional care, whilst social services and non-institutional care are practically undeveloped. The system of social protection, through contributory and noncontributory benefits, provides more or less minimal amounts of benefits, which are not sufficient to satisfy the basic needs of participants. In addition, some strict eligibility criteria exclude and discourage large families, and families with many children. The coverage of the poor by the social assistance programs is low, 13.5% of poor households are covered by assistance benefit. Amongst unemployed individuals, close to 80% are not eligible for unemployment benefit, whilst amongst those receiving benefit, the largest share is made up by those who are eligible until retirement age. The situation in the pension system is even more concerning, namely among those aged over 65, from whom only 52% are beneficiaries of either disability or age pensions. Poverty assessment for Montenegro is not based on European, or any other standardized data source. The most recent poverty assessment for Montenegro was produced by MONSTAT in 2006. According to this data and the poverty line, set at a level of 144.68€ per equivalent adult person per month, 11,3% of Montenegrin population or 71,000 citizens were categorized as poor during the years 2005 and 2006. Also, the wider poverty line was defined at the level of absolute poverty line plus 25% in order to identify the vulnerable population. It included, besides the poor population, citizens who were at high risk of poverty. This poverty line was set at a level of 180.85€ per month, and according to it, in 2005 the poverty rate was 25.3%, whilst in 2006 it was 23.6%. The poverty rate remained the same between 2005 and 2006, whilst other indicators showed a slight improvement of the situation with the poor population. The report showed a significant lack of accurate data regarding social protection and social inclusion in Montenegro. The majority of information was produced by international financial institutions (the World Bank) and other research institutions, however, the comparability of the data was limited due to different underlying factors as well as indicators that were different from those used in the EU. Even in cases where there was an official statistical measurement, like in the Labour Force Survey, the results of the survey seemed to be unrealistic and unreliable. This creates a significant gap in knowledge on social inclusion, especially amongst the most vulnerable groups such as the Roma population, refugees and displaced persons, but also amongst others, such as people with disabilities, children and youth as well as the elderly and retired. There is a strong need for synchronization and improvement of national social statistics from data producers in Montenegro – MONSTAT, MHSLW, the PIO Fund, the Health Insurance Fund, EAM. Also, the implementation of EU statistical standards (ESPROSS) is one of the key priorities in the area of social protection statistics. 142

In general, the challenges of the whole social protection system are as follows: better inclusion, development and planning of human resources, improving the infrastructure and the range and quality of services, enabling adequate and sustainable funding, as well as decentralization. 6.2.

Challenges Ahead

Key challenges have been structured according to EU objectives for social protection and the social inclusion process, adopted by the European Council in March 2006. Challenges for the Social Protection and Social Welfare System: o Targeting social protection benefits to fit demands for social welfare. Social welfare benefits should be focused either on eligibility or on the duration and size of benefits. Rigidities in both aspects threaten the adequacy, accessibility and social cohesion of beneficiaries. o Transparency and monitoring of the system. A transparent and accessible system of social protection could increase the confidence of social welfare beneficiaries. More rigid sanctions for the violation of the social protection system, both by beneficiaries and administrative bodies, could improve the public opinion of professionals involved in the social protection system. o Decentralization of Centres for Social Work in terms of financing and the delivery of welfare. This would involve local municipalities, with the main aim of securing improved access to and the efficiency of the social welfare system. o Improved administrative capacities of institutions included in the social welfare provision, primarily the MHSLW, and institutions in charge of delivering of social services. Challenges to the Eradication of Poverty and Social Exclusion: o The identification and design of appropriate measures for excluded groups, including those not yet recognized by the government as being excluded, and to include the working poor, redundant workers, females from ethnic communities living in rural areas, large families, unemployed parents and single parents, and those living in state institutions. o The diversification of policy measures for various groups living in poverty, including adjusting measures to meet the actual needs of beneficiaries, combining training and counselling services for individuals that fall into the poverty zone and by increasing financial assistance for the traditionally (Roma) or chronically poor. o The increase in access to various social resources, to rights and services, especially access to education and health care for those living in remote rural areas. o The inclusion into the education system and persons.

the training of young unemployed

143

o The prevention of social exclusion by increasing enrolment into the education system, by reducing the number of early drop-outs and by increasing access to primary education for vulnerable groups, i.e. Roma children, children with disabilities. o The efficient implementation of planned activities for poverty eradication, as well as carrying out active monitoring of the implementation process. Existing strategies for combating poverty in Montenegro have been established in accordance with EU objectives and show the willingness of the government to intensify its work on the alleviation of social exclusion in Montenegro. o The coordination of multi-sectoral and multi-institutional actions as well as the intensification of communication between stakeholders, especially those at national and local levels, and with NGOs involved in the alleviation of social exclusion and poverty. o The provision of financial sources dedicated to targeted policies and the planning of actions necessary for the implementation of different projects on the ground. It is imperative that the state budget clearly defines the funds that are dedicated to the implementation of activities working to eliminate social exclusion. o The improvement of knowledge and data available about social exclusion. A clear program of research and surveys should be drafted for the long term. Some of these surveys should be the responsibility of National Statistics, but independent research institutions, including collaboration between domestic and international research institutions, as well as international organizations, should all take part. This process should be a part of a much wider process of improving statistical capabilities, with the added aim of harmonizing statistics with EU requirements. Pension Challenges: o The assessment of who, among the elderly, both male and female, is not covered by pension insurance, and those lacking support either form formal or informal social networks, should be included in social inclusion programs. o The assessment of which groups are not, but should be, covered by the pension system – redundant workers, those employed in the informal sector, those employed in the subsistence economy, vulnerable ethnic groups like Roma, those without working records, those who are unable to work, etc. o The creation of an institutional framework that will encourage people to work longer and more productively. The main challenges are to include those who are not formally employed, or are not sufficiently employed to receive the minimum wage, into the system. The minimum pension should be such that it will not disrupt work incentives. One of the priorities of reform is also to reduce the costs of administering the system. o The adequacy of retirement income. Measures should not only be aimed at ensuring a certain standard of living for the elderly, but more generally at providing a means for people to maintain, to a reasonable degree, the standard of living they reached in their working lives, and to enable pensioners to participate actively in public, social and cultural life.

144

o The modernization of the system. The main objective should be to adopt measures aimed at promoting more flexible employment and career patterns, to bridge the opportunity gap between women and men, and to demonstrate that the pension system is able to meet its requirements. o The achievement of financial sustainability in the system. The collection of contributions should be significantly improved, by minimizing evasion and noncompliance, as this has a decisive impact on the viability of the pension system. o The improvement of transparency within the pension system through public debates on the future of the pension system. Challenges for Accessible, High Quality and Sustainable Health and Long-Term Care: o A well organized and effective healthcare system that will be effective, efficient and equitable and that will promote solidarity between groups (rich and poor, healthy and sick, young and old). o Extending primary health care reform. Primary health care is the health service most available to the population. It monitors health, studies factors that impact on health and provides preventive measures and treatments that do not require sophisticated technology or a specialized knowledge. Primary health care is also at the base of the health care pyramid from which specialized secondary and tertiary services are directed for more extensive health care needs. o A universal health care approach – Greater attention should be given to private sector payments. Current costs are high enough to affect access to health care for a large number of citizens. Cost control measures taken in most countries have shown an increased financial risk for services providers and for patients. If that risk is not neutralized with increased productivity it is possible that vulnerable groups will be most affected. Therefore, monitoring the impact of reform measures against household consumption should be introduced. Monitoring should help to identify problems and offer solutions. This is in line with the EU objective of access to adequate health and long-term care for all. o Improvement in quality and efficiency through intervention on the supply side – As the owner of the major part of the health service network, the government should start at least two initiatives addressing the inefficiencies in the current health care system. The first is to make hospitals more efficient in order to increase quality of health services and to adjust to the varied epidemical profile of Montenegro’s population. This reform would include the merging of specialized centres in order to achieve economies of scale. The second initiative is the decentralization of primary and secondary health care, i.e. to transfer of responsibility to local governments. o Access to health care of vulnerable groups. Poor housing conditions appear to be a key factor in the poor health of RAE, even after developing a natural immunity to various diseases in their environment. A priority in terms of improving the health conditions of RAE, would be to provide legal housing with improved sewerage and water supply systems.

145

o An education program should be implemented for citizens in order to inform them of the consequences of their own health decisions. Health education should be included in primary schools and high schools as a special subject, and/or within other subjects. Children and teenagers (and their parents indirectly) would adopt a basic knowledge of healthy living, personal hygiene, nutrition, physical exercise, illness and injury prevention, sexual education, addictions (alcoholism, drugs, smoking) and their impact, etc. o Sustainable health financing will need to be secured, including adequate funding for public health services; population based preventive programs and capital investments.

146