If x equals "Corruption", then y must equal "Economic Regression"

2009 Index of Economic Freedom

The 2009 Index is the first to assess Montenegro's level of economic freedom. The country's economic freedom score is 58.2, making its economy the 94th freest in the Index. Montenegro ranks 36th out of 43 countries in the Europe region, and its overall score is just below the world average.

Montenegro scores above the world average in trade freedom, fiscal freedom, monetary freedom, and business freedom. The economy has been relatively stable despite high fiscal deficits. The average economic growth rate during the past five years has been over 3 percent, but unemployment remains high at over 10 percent. The average tariff rate is moderate, but non-tariff barriers limit overall trade freedom. Monetary stability is relatively well maintained, and the flat income and corporate tax rates are competitively low.

Montenegro needs a stronger commitment to reform. External debt has been growing in recent years, and the institutional capacity to protect property rights and deal with corruption remains weak. Better budgetary control at all levels of government is necessary to target spending more effectively.

Let's look at some sombering specifics:

Obtaining a business license takes more than the world average of 18 procedures and 225 days. Regulations are inconsistent and non-transparent, and fees related to completing relevant procedures are high.

Montenegro's simple average tariff rate was 4.9 percent in 2006. Progress has been made toward liberalizing the trade regime, but some high tariffs, some import restrictions, weak implementation of non-transparent standards and regulations, weak enforcement of intellectual property rights, and corruption still add to the cost of trade

Total government expenditures, including consumption and transfer payments, are high. In the most recent year, government spending was estimated to be about 42.7 percent of GDP. Privatization has stalled, and necessary reforms have not been undertaken in energy and labor.

the government influences a few prices through state-owned enterprises; retains the right to control the prices of certain basic products; and regulates utility, energy, and transportation prices.

The constitution serves as the foundation of the legal system and creates an independent judiciary. Historically, the judicial system has been inefficient; judges are poorly trained. Sales of pirated optical media (DVDs, CDs, and software) and counterfeit trademarked goods (particularly sneakers and clothing) are fairly widespread. Procedures for enforcement of intellectual property rights are governed by recently enacted Laws on Civil Procedures.

Corruption is perceived as significant. Montenegro ranks 84th out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. There is a widespread perception of government corruption, particularly in the executive and judicial branches and especially with regard to the privatization of state-owned firms. Conflict-of-interest legislation requiring the disclosure of government officials' salaries and property has not been fully implemented, and many officials refuse to comply. Organized crime, especially the smuggling of gasoline and cigarettes, has long been present in Montenegro.

Montenegro's rigid labor regulations hinder overall employment and productivity growth, contributing to a persistently high level of unemployment. The non-salary cost of employing a worker is relatively high, and regulations related to the number of work hours remain rigid.