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CORRUPTION IN THE COUNTRIES OF SOUTH-EASTERN EUROPE

Bosnia-Herzegovina:

REPUBLIKA SRPSKA: CORRUPTION IN THE MEDIA

Milkica Milojevic (AIM Banja Luka)

At the beginning of August the population of Republika Srpska faced two misfortunes reminiscent of the early 1990s: the bankruptcy of the Banjaluka-based Kristal Banka and shortage of gas at state-run gas stations. The same day the new manager of the bank was appointed, former RS premier Milorad Dodik said that a group of people from the RS customs administration were involved in illegal imports, using the proceeds to pay Radovan Karadzic's bodyguards. Furthermore, Dodik added, the notorious Typhoon spy ring had become active once more and was extorting money from Banjaluka businessmen.

At a first glance, the bank, the oil shortage, and the former premier's statement have nothing in common apart from the fact that they occurred at the same time. But when observed more closely they reveal that corruption is their common denominator. Back when Dodik was in power, Kristal Banka was considered the most successful bank in Republika Srpska. Such a reputation enabled it to issue millions in loans and guarantees, mostly via personal connections. Quoting non-government sources, the media reported at the beginning of the year that among the lucky recipients of the bank's loans were favorites of the former cabinet: Dragan Zizic, owner of the Zmijanjeplast company, who received DM14.8 million, and Nikola Vukelic, owner of the Poljeksport company, who received DM9.5 million. These allegations have never been denied.

Among the recipients of Kristal Banka's guarantees were the state-run oil companies, Energopetrol and Srpski Brod oil refinery. Because of its business practices the bank became illiquid, and without the bank's support the storage tanks of the RS oil industry simply dried up. According to the European Bank for Reconstruction and Development, in May this year Kristal Banka was about DM80 million in the red, and had only DM10 million in deposits.

According to the incumbent finance minister, Milenko Vracar, the previous government used selected banks to approve DM37 million in loans >from state funds to state-run and private companies without any firmly established criteria. A survey done by the World Bank in Bosnia-Herzegovina has shown that for any major deal to be realized, four percent of its total value has to paid in bribes.

The current government has loudly declared an all-out war on corruption, but it went only as far as drafting bills against money laundering and corruption. Only when the bills are passed will the government form an anti-corruption team. The Dodik government, as opposed to Ivanic's, had an anti-corruption team. It was headed by -- Milorad Dodik himself! Corruption in Republika Srpska is so deeply rooted that it has affected the language as well. Thus in modern Serbian the word "participate," means to charge a certain fee for approving a deal, whereas the question "what's in it for me," refers to the percentage a prospective entrepreneur needs to pay for a chance to close a contract.

World Bank experts in Bosnia are right, the easiest to bribe are inspectors. A report on corruption in Bosnia-Herzegovina that was recently published, includes a price list of bribes payable for minor services. The average bribe is DM361; the services of tax and customs officials are the costliest -- they expect to earn about DM600 per deal. Installing a power or telephone line costs DM288 on average, a license or a permit is priced at DM463, a deal in a court can be arranged for DM216, but the going price for various inspectors is only DM120.

As of recently, the International Crisis Group became interested in corruption in Bosnia. The group pointed out the devastating effect of corruption on economic and social conditions in the country. There is, however, the issue of the purpose of such warnings since the people are already very well acquainted with the sort of society they live in. "The people are a hundred percent aware of corruption, and according to the World Bank report, almost 60 percent know that it will make the poor even poorer, and the rich richer," says the director of Transparency International (TI) for Bosnia and Herzegovina, Boris Divjak. As opposed to what the people think of corruption, which was covered by surveys done by the Partner agency and the Bulgarian Center for Democratic Studies, there are no other indicators of the extent of corruption in Bosnia and Herzegovina and Republika Srpska. "So far, Bosnia was not on our list of highly corrupt countries, because we don't have enough data. According to TI rules, we should base our views on at least three international surveys over a three-year period," explains Divjak. It is quite certain, however, that Bosnia- Herzegovina is among the most corrupt countries in the world, in addition to Yugoslavia and Nigeria. Many circumstances point in that direction, and most of all the fact that national borders are no obstacle to corruption, that its character is regional to say the least, and that Bosnia's neighbors are deeply affected by the same disease. When cigarette smuggling, for instance, is in question, Bosnia is but a single link in the smuggling chain, while the greatest share of the profit goes elsewhere, says Divjak.

It is interesting to note that according to the Bulgarian Center for Democratic Studies as many as 47 percent of Bosnia's population consider corruption to be the greatest problem in the country. As opposed to them only 37 percent believe political instability is the biggest problem, while 20 percent think it is poverty. Only 15 percent say that interethnic tensions are the biggest issue. The people believe that the customs service is the most corrupt government agency, followed by the police, municipal administration, courts, and tax administration. "Corruption is the greatest where discretionary rights are the widest," says Divjak. "This is why the customs service is the most vulnerable spot even in the best ordered societies, let alone here, where there are seven levels of authority: Bosnia-Herzegovina, the two entities, the three ethnic communities, the international community and, finally, the increasingly powerful mafia. According to KAFAO data, of over 400 border crossings only 20 percent are under close control. Claims that the situation will automatically improve once the Bosnian State Border Service is dispatched there are empty stories. There are indications that the service is even more susceptible to bribes than the RS customs service.

One of the biggest problems in the corrupted RS, Divjak believes, is not only the evasion of customs fees, but also of taxes and other dues to the state. Milica Bisic, advisor to the RS premier for economic issues, recently said that according to official estimates the RS budget annually loses DM300-DM500 million, which is one half of its annual value.

Public procurement, if done secretly and via personal ties, is undoubtedly one of the greatest corruption problems in RS. "DM43 million alone was dumped in the hole made for the foundations of a RS government building that was never built," Divjak adds. "The new government passed a public procurement bill, but in the two months that have elapsed since, not a single public tender has been announced. I simply cannot believe that no public procurement worth over DM50,000 was made in the meantime," he said.

One of the sources of corruption is privatization of state companies, and particularly, delays in privatization. A number of RS companies have been declared "strategic" for two reasons: some because they are making profit, which is used to finance the political parties that control them, and the other because they are in desperate condition. "No government can admit that these companies have no future because they employ thousands of voters," Divjak says. According to him, all forms of corruption strengthen organized crime, especially the Russian mafia, which is entering the region through the increasing number of Cyprus and Baltic companies and banks. These companies can be expected to appear as buyers of state capital in the privatization process, and settle permanently in RS and the Muslim-Croat Federation.

In less than a year, the High Court Council of RS has received over 400 complaints about judges. This, however, is far from revealing the real picture of corruption in the courts, because most people do not resolve their problems by filing complaints, but with bribes. It is interesting to note that as many as one-fifth of Bosnian citizens, according to surveys, believe that corruption reigns not only in the customs service, police and courts, but in the media and international organizations as well. Media circles, especially major media outlets, are rumored to have developed a special form of extortion. Such media outlets reportedly inform powerful companies, organizations and political parties they will not publicize "embarrassing information" if they advertise with them. The cost of silence is allegedly thousands of German marks.

TI recently published a survey on corruption in international organizations. Surprisingly enough, the results were all but spectacular. Instead of specific data, the survey offered only general conclusions confirming the presence of corruption is that sector as well.