Global Economics

Corruption Claims Hold Back Bosnia


Allegations of fraud in government contracts and privatization are pitting the government against monitors and scaring off foreign investors

The ability of Bosnia's Serb-dominated entity to fend off lingering suspicions of high-level corruption is again being tested, even as the entity government claims to be launching a new anti-corruption initiative.

In the past few months Republika Srpska has lost a large foreign investment amid suspicions of political meddling in major industries and has seen controversy-prone Prime Minister Milorad Dodik embroiled in a corruption scandal of his own. This has made cooperation with Bosnia's international monitors even more contentious and, some analysts believe, may slow the planned transition to a softer, less intrusive international presence throughout the divided country.

DODIK HAS A PLAN

Last month came the latest episode in a long-running battle of words between the Republika Srpska government and critics from civil society and international bodies, when Dodik reacted angrily to a report of a probe by Bosnian prosecutors into fraud at the highest levels of his government.

After news reports in February said criminal charges had been filed against Dodik himself, Dodik said the deputy director of the State Investigation and Protection Agency, Dragan Lukac, had acted behind the backs of his superiors and in violation of legal procedure.

It remains unclear whether the central government prosecutors followed due procedure in preparing the charges. In addition, Republika Srpska Justice Minister Dzerard Selman said the media reports mistakenly referred to a prior investigation and blamed SIPA for the error.

Dodik attributed the indictment to a "sectarian group" that probably wanted to see his dismissal before the appointment of a new international high representative, following the resignation of Miroslav Lajcak in January to become the new Slovak foreign minister. On 23 February European Union foreign ministers put forward the name of Austrian diplomat Valentin Inzko to replace Lajcak in a job that was supposed to be phased out by this June, giving way to an EU special representative with fewer powers. Many in Bosnia now suspect that the slow pace of change in the country in many important areas, including its pervasive corruption, will delay the end of the high representative's office, and consequently the reinforcement of the EU's role.

With or without the criminal charges, Dodik, once the darling of the international community, especially Washington, has been highly controversial and in constant conflict with the internationals in Bosnia. He became infamous for insulting journalists and representatives of nongovernmental organizations.

Dodik last tangled with the central government's judicial authorities in November, when international prosecutors at the Court of Bosnia and Herzegovina requested documents from the Republika Srpska government concerning the financing of a 110 million euro government building complex in Banja Luka and on construction of a highway. Dodik refused, saying the court had no jurisdiction over Republika Srpska, and filed a lawsuit against Deputy High Representative Raffi Gregorian and international prosecutors. He accused Gregorian, an American, of plotting against Republika Srpska and said central-level prosecutors and judges were biased against Serbs.

Eventually, under pressure from international representatives, Dodik handed over copies of documents and the lawsuit was dropped. But when he said it was unacceptable for Muslim judges on the court to probe into Republika Srpska's affairs, Lajcak and the U.S. Embassy in Sarajevo delivered unusually sharp rebukes.

Then, in December, Dodik declared a new, more effective anti-corruption strategy for the Serb entity, saying corruption remained a serious problem. He also announced the formation of a council to monitor implementation of the strategy and to "inform the public about corruption." No further announcements on the strategy or the council have been made.

POWER STRUGGLE

The entity government's international standing took another blow in January when the Czech energy group CEZ (CEZP.PR) pulled out of a 1.4-billion-euro project, one of the largest foreign investments in the entity.

CEZ said it would sell back its 51-percent stake in a power generation and mining project to its local partner, the public power utility Elektroprivreda RS (ERS) because of "repeated breach of the implementation contract by its partners" in Bosnia, the company said in an announcement posted on its website.

Although the entity government and CEZ both said that this "safety option" didn't necessarily mean the deal was dead, CEZ stated that the will to continue had been seriously shaken.

CEZ acquired the Gacko thermal power plant, one element in the proposed joint venture with ERS, in a privatization process alleged to be full of irregularities by the Bosnian chapter of Transparency International.

"Now, with CEZ out, not only there will be no announced investments, but the RS government, that is, ERS, will have to pay damages for breach of contract. The image of the country in the world will suffer further damage," said Srdjan Blagovcanin, executive director of Transparency International Bosnia and Herzegovina.

Foreign investments were already "hopelessly low," Blagovcanin said, "and will stay that way for a unpredictably long time after this."

COMFORTABLE WITH CORRUPTION

When Transparency went public with its allegations of irregularities in privatization deals in the oil and power industries, the Republika Srpska government sued it for libel, and government-controlled media accused its members of trying to extort money from people suspected of aiding war criminals. In July the group temporarily closed its Banja Luka office over security concerns raised by the lawsuit and negative media coverage, reopening only after support from European Commissioner Olli Rehn and substantial international pressure on the Banja Luka government.

Corruption penetrates the highest levels of government in Bosnia and the political will to tackle it is absent, Blagovcanin said.

A divided and influence-prone judiciary is seen as another weak point in the fight against corruption. Republika Srpska and the country's other entity, the Croat-Bosniak Federation, each have separate judicial systems. When legal action is taken, only small fish are netted, in spite of many citizen complaints about senior party officials, said Sevko Bajic of GROZD (Civic Organization for Democracy), a group with branches throughout Bosnia.

"Whenever someone mentions, or even proves corruption, to some politician or a government official, they will say that you're not a patriot, that you shouldn't attack your own, and that the case is politically motivated," Bajic said.

"Only when the ruling political parties deal with corruption within their own ranks will things get better. As long as 'thieves' from other nationalities are being caught, I think the story has a political background. They remain committed to the fight against corruption, and yet corruption has become the lifestyle and it's difficult to deal with," said Tanja Topic, a political analyst with the Friedrich Ebert Foundation, a German organization dedicated to international democratic development.

Corruption is deeply entrenched in this society, agrees Ivan Sijakovic, a sociologist at the University of Banja Luka.

"There are sufficient arguments for the hypothesis that Bosnia, and the whole of the Balkans, are suitable for corruption. This area has a 'cultural code' with communication elements that include corruption. It's been the lifestyle for centuries, and one of the means of contact between citizens and the state and government. All it takes are conditions for this 'code' to develop, and those conditions exist here today and will remain here for a long time," Sijakovic said.

"All activities and everyday contacts between people and institutions in the region imply corruption, which has become the symbol of doing business, as well as the relationship between the citizens and institutions that are supposed to provide service to them. One can always hear the question 'What's in it for me?' After all, corruption is the lifestyle of most of the citizens around here."

Transparency International names the police, political parties, the health sector, the customs service, and the two entity governments as the most corrupt institutions in Bosnia.

In recent years, under pressure from the international community, the weak central government has adopted three strategic plans and ratified numerous international conventions on corruption. But the strategies are not implemented and governments have neglected their international commitments, Lajcak told an anti-corruption conference in Sarajevo last December.

"Corruption in [Bosnia] is huge and takes all forms – bribery, nepotism, tax evasion, mismanagement of public funds, and many others," Lajcak said.

In a remarkably frank interview on Bosnian television, the outgoing high representative said Dodik had been the most troublesome of Bosnia's leaders to work with. Lajcak also charged that the international bodies in the country were failing to stem infighting among local politicians that is crippling the country's ability to move forward.


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