Serbia`s fight against corruption: politicians, taycoons and public enterprises

May 03, 2011 with Verica Barac


Serbia is in a deep political crisis, says Verica Barac. The government is and ineffective, and the political parties are corrupt and the government`s institution in the country will be destroyed. In an interview with the head of the Serbian Anti Corruption Council found words about the condition of democracy in the Balkan state. 

BARAC: In order to have a critical mass ready to fight organized crime and corruption, first of all there need to be good and harmonized laws and strong state institutions that can guarantee their enforcement, as well as free and professional media to form the public opinion regarding the problem of corruption, which we do not have in Serbia.

This is a fact which is pointed out not only by the local professional community, but also by a number of European Union institutions. Accordingly, the Global Corruption Perception Index (CPI), too, has ranked Serbia among the countries where corruption is an extremely serious, systemic problem. Last year Serbia was placed below all the former Yugoslav republics, except for Bosnia, which is certainly a cause for concern.

"Institutions are degraded and abused" In which condition are the state institution?

BARAC: Institutions in Serbia are being destroyed instead of being built. The poor state of the institutions is particularly well illustrated by the example of the State Audit Institution (SAI). In their attitude towards the first findings of the Auditor General on the expenditure of the budget for 2008 and 2009, the political parties in Serbia have shown a clear intention to belittle the newly established institution, whose successful operation is essential for the control of the authorities, for establishing a responsible government, and curbing the arbitrary behaviour of the Government in managing public funds.

However, the Serbian Parliament, contrary to the Law on State Audit Institution it had adopted, first allowed many years to elapse before it was established, and after the SAI was established, the Parliament avoided discussing the SAI reports at its sessions. What is particularly surprising in this attitude and what gives an especially dark picture of the political situation in Serbia is the total lack of interest shown by the opposition parties in the SAI report on the budget spendings, because of which the presentation of the SAI report for 2008 to the MPs was delayed for months. As the Parliament speaker explained on the occasion, none of the MPs ever proposed that this item be including in the agenda!

It seems unbelievable that the opposition parties were not interested in a document full of allegations of misuse of budget funds by the Government, but this situation precisely depicts the deep political crisis in Serbia. The state in which we live with a weak and ineffective government is a consequence of the fact that the political parties are funded in a corruptive way and consequently they transfer their corrupt relations to the institutions. They cannot allow an independent and lawful operation of the institutions, because doing so they would endanger themselves. Therefore, institutions in Serbia are degraded and abused, instead of being built; I think that there are no grounds for Bozidar Djelic’s conviction that there exists a critical mass in the government administration which is ready to deal with organized crime and corruption.

"Who is responsable" Do you think that Boris Tadic is the most responsible for the corruption in the country?

BARAC: Institutions have responsibility in accordance with their responsibilities and powers in our system, and the main responsibility lies with the Government because it creates an environment in which institutions should be able to discharge their duties, in which prosecutors should be able to prosecute suspects unselectively and freely in accordance with the relevant evidence and not in accordance with the interest of political parties in power and those who enjoy their protection. This problem is most visible in the case of institutions which tend to do their duties well and whose work, despite various obstacles, is yielding results and which therefore enjoy the trust of the people.

However, their results are limited because they work on the basis of laws that are not good enough. Such is the case, for instance, with the Commissioner for Free Access to Information of Public Importance, whose office is doing its job excellently, but it does not have sufficient mechanisms to force those who are obliged according to the Law on Free Access to Information of Public Importance to publish information that they do not want to disclose.

If a state agency or a public company refuses to comply with the order of the Commissioner, all the Commissioner can do is to impose a fine, which is then paid by those who violate the citizens’ right to know information of public interest from the budget, and at the expense of the same citizens whom they have already denied the said right.

Responsibility for such cases, of which there are many, certainly lies with the Government, which has the authority to propose legislation and other general acts to the Parliament and to give opinions on draft laws and other general acts proposed by others. The Law on Free Access to Information of Public Importance was adopted at the proposal of the Government.

"Anti-Corruption Council" vs "Anti-Corruption Agency" The European Parliament has issued a written question to Stefen Füle, stating that there is evidence that the Anti-Corruption Council has on numerous occasions interfered with the competencies of the both the Anti-Corruption Agency and the Prosecutor`s Office and that it has falied to respect the uindependance of the Supreme Court in Serbia. What is your replay to these allegations?

BARAC: I know that the Bulgarian MP Dimitar Stoyanov recently raised this question at the EU Parliament. I do not know on which data such a statement was based, but I think above all it failed to grasp the problem of corruption in Serbia. The Anti-Corruption Council does not and cannot interfere with the jurisdiction of the Agency. On the contrary, we can only assist other institutions in their work.

The Council is an expert advisory body, which analyzes the problem of corruption and the activities in the fight against corruption, proposes measures to the Government to be taken in order to enhance the fight against corruption, and monitors their implementation.

On the other hand, the Agency has been established as a state body responsible for curbing conflicts of interest and controlling the funding of political parties. And the Agency, unfortunately, does not or is unable to discharge these tasks because the law itself by which it was established includes mechanisms preventing this body to do its job.

During the drafting of the Law on the Anti-Corruption Agency in 2008, the Anti-Corruption Council indicated to the Government that Serbia would have this problem, which was our job as a body established with a mission to review the activities of the Government in the fight against corruption, but we have never interfered with the jurisdiction of the Agency, nor is such a thing even possible. Such claims imply, or intend to exert pressure on the Council, or they are a result of complete misunderstanding of the problem.

The problem in the work of the Agency is not interference in its jurisdiction by any the other body, but the bad law by which the Agency was established, which was adopted by the National Assembly at the proposal of the Government. The aim of this law was not to prevent conflicts of interest and establish control of the funding of political parties, but rather to prevent the performance of these tasks, and to annul the previously achieved good results.

"Will the Government ever build a stable institution?" How has the Anti-Corruption Agency been established?

BARAC: Specifically, the first law regulating the conflict of public and private interests in performing public offices in Serbia was adopted in 2004. Then the Government consulted the Council in drafting the Law and accepted most of our suggestions for amendments. That Law established the Republic Committee for Resolving Conflict of Interest, which, despite initial problems in its work caused by the Government, after two years managed to become independent and  established a good practice that started producing concrete results.

At that time, in 2006, the Ministry of Justice began to criticize its work and announced the dissolution of the Republican Committee and the establishment of the Agency. Even then the Council pointed out to the Government and to the Ministry of Justice that it was obvious pressure on the work of the institution that took great effort to overcome great obstacles in the work that were created by the executive power itself (I shall only mention that this Committee had no office for a whole year, nor any administrative support), and which had successfully begun to perform its duties and, more importantly, to gain public trust. In 2006 we presented to the Government and the Ministry of Justice an unequivocal view that the dissolution of the Republic Committee would contribute to the weakening of the fight against corruption and show that the Government actually had no intention to build stable institutions.

However, rather than provide better conditions for efficient operation of the existing institution, whose establishment was based on the 20 principles of the Council of Europe in the fight against corruption, and which had gained good experience in carrying out the activities within its jurisdiction, in 2008 the Government abolished this institution and formed a new, large and expensive anti-corruption agency, which can become a source of corruption itself and which is, as it appears now, powerless to enforce the law by which it was established and to exercise the delegated powers.

"Massive Conflict of Interest" What are the consequences?

BARAC: Consequently, nowadays it is possible in Serbia that one person may discharge offices at the same time in the executive and legislative branches of power, and also be the director of a state-owned company. I shall only bring to the public’s attention the well-known example of Dusan Bajatovic, who is a senior official of the Socialist Party of Serbia (SPS), and who, along with duties as a member of the National Assembly of Serbia, holds two more offices – the director of the state-owned company Srbijagas and a member of the Jugorosgas Management Board. Nevertheless, although in a sharp conflict of interest, Bajatovic does not have to give up any of the offices he holds. If to all this we add the fact that the TV Most, which has a regional broadcasting license, is owned by the parents of this multiple holder of public offices, then you can get a picture of the concentration of power possible in Serbia once again, two years after the abolition of the Republic Committee and the establishment of the Agency. Therefore, problems in the work of the Agency come from deficiencies in the law by which it was founded, and not from some kind of interference in their work, which I am not aware of and I do not know how it would be possible.

The attitude of the Council, which is based on the 20 principles of the Council of Europe in the fight against corruption, has always been that an effective fight against corruption should be carried out by small, highly-specialized and independent bodies, such as the Republic Committee for Resolving Conflicts of Interest, or as the institution of the Commissioner for Free Access to Information of Public Importance. The Republic Committee should not have been abolished, but rather the Government should have strengthened its work by proposing amendments to the legislation, as it is required in the case of the Commissioner for Free Access to Information of Public Importance.

"Rumours reach the European parliament" How do you comment the alligations against the Anti-Corruption Council?

BARAC: As for the accusations of interference in the jurisdiction of the prosecution and disrespect for the independence of the Supreme Court, I would need to know what exactly they refer to. The Council has never done so and I do not know what is meant by the charges. However, I can assume from where such rumors are brought to the European Parliament.

For years the Council has submitted to the Government reports in which we research and analyze specific phenomena of systemic corruption, listing the names of certain powerful individuals who, in a suspicious way, amassed enormous wealth during the rule of Slobodan Milosevic, and who are now in a position to exert influence on officials in Serbia with the capital acquired in that way, and to pay lobbyists in the European institutions to create confusion about the nature and magnitude of problems in Serbia.

European institutions would have to bear in mind that people who have great financial power today in Serbia, and who are lobbying in Europe for their interests, are the same people who until 2000 had been on the list of several hundred persons who were banned from entering EU countries because they were close to the regime of Slobodan Milosevic.

"The most powerful Serbaian Tycoon" Can you give us an example?

BARAC: Let us take, for example, Milan Beko, one of the most powerful of the Serbian tycoons, who was on that list as a person “whose activities supported President Milosevic”. Beko was the head of the Ministry of Privatization at the time of Milosevic's rule, and was in charge of privatization and the key negotiator in the sale of Telekom Serbia in 1997. Beko testified about it before the judicial authorities in Italy, but the role of many actors in the transaction, who were suspected of taking unlawfully a large commission in the transaction worth more than 1.5 billion German marks, has remained unsolved so far.

As the director of the car industry Zastava Kragujevac, Beko created the infamous "defense" of the factory using "human shields" during the NATO bombing of Serbia and then in 2000 he was a candidate of JUL, the party of Milosevic's wife Mirjana Markovic, for the position of an MP at the Chamber of Citizens of the Federal Assembly. The origin of his money has not been examined so far, but instead he was allowed to use that money through off-shore accounts to purchase the most valuable Serbian companies with serious violations of the legislation on privatization, securities market and competition protection, as it was in the case of Luka Beograd (Port of Belgrade), Novosti, Knjaz Milos, C-Market ...

The Council has analyzed these cases in its reports, which were submitted to the Government, and we have filed a criminal complaint to the Prosecutor’s Office in connection with the takeover of the Luka Beograd shares; therefore it is quite pointless to argue that we actually interfere with their work. We have just filed a criminal complaint with the Prosecutor’s Office, which is the duty of everyone who comes across information about violations of the law. However, I think it is clear from which source untruths are conveyed to the European Parliament aiming to create an erroneous impression about the state of corruption in Serbia. Of course, we have nothing against lobbying as a legitimate and legal mechanism of the struggle for the achievement of one’s interest, but it is very important to know the context in which it is done, and who and why they are lobbying. According to which rules do you act and what is the exact jurisdiction of the Anti-Corruption Council?

BARAC: The Council is an expert advisory body, established by the Government’s decision in 2001 with the mission to examine the problem of corruption and the activities undertaken to suppress it, and to propose to the Government measures for the promotion of the fight against corruption. Over the years the Council has established a practice by which it primarily carries out research and makes analysis of the phenomenon of systemic corruption on the basis of which it can recognize the mechanisms of corruption in Serbia and formulate proposals for their elimination.

"Criminal charges against 17 people" The Council has filed charges against Miroslav Miskovic and Milan Beko concerning the Port of Belgarde. How are politicians and political parties helping the tycoons?

BARAC: Besides the Government, the Council delivers all its reports to the Prosecutor's Office because numerous findings of our research indicate the existence of possible corruption in terms of criminal acts, which makes us obliged to inform the prosecution. In order to help the prosecutors in their work on complex cases of systemic corruption, on 14 May last year the Council submitted to the High Prosecutor's Office for Organized Crime in Belgrade criminal complaints against 17 persons on suspicion that in 2005, in the unlawful procedure of the takeover of Luka Beograd (Port of Belgrade), they caused damage to the State of at least 21 million euros.

The criminal complaints included, among others, Milan Beko, as the documentation examined by the Council indicated that Mr. Beko was the organizer of this group. However, despite the fact that, besides the Council, a number of lawsuits and criminal complaints have been also filed by the small shareholders of these companies in connection with the takeover of Luka Beograd, C-Market and many other companies, the Prosecutor has not initiated any action regarding them. Only from time to time they make statements in the media, such as: “The Prosecutor’s Office is intensively working on the conducting of investigative actions, gathering facts and evidence”, or “No one is stronger than the state”, and the like.

One of the ways in which politicians help tycoons are selective actions of the prosecution, which is in Serbia still heavily under the influence of the executive power. There is a striking continuity in the work of prosecutors’ offices with the period of Milosevic's regime. The experience of the Council while working on the reports on the phenomena of systemic corruption indicates that, eleven years after the toppling of the Milosevic’s regime, Serbian prosecution still lacks the basic prerequisites for independent work, and that it entirely depends on the executive power. How can the situation be changed?

BARAC: This situation may be changed and will be changed only by making good laws and building stable and independent institutions that will enforce such laws. The collusion between the political structures and state-owned companies on one hand, and the political structures and tycoons on the other hand, are obstacles to these changes and the main source of corruption in Serbia.

"The biggest obstacles to the democratization of Serbia" You called the whole privatisation since Milosevic money laundering. How is the current situation?

BARAC: Still today, the biggest obstacles to the democratization of Serbia are the survival of the secret services of the former regime and the pumping of the money stolen during the nineties into the legal channels through privatization. In 2007 OSCE concluded that privatization in Serbia completely failed to control money laundering, and today we are witnessing how the former officials and associates of Milosevic’s regime have become financially the most powerful people in the country, who have purchased the most valuable Serbian companies through privatization. The conclusion is self-evident. It is striking that the privatization process in Serbia did not enable the provision of more efficient managements to the privatized companies, but rather an opportunity to the new owners to legalize their illegally acquired wealth through it.

However, an even bigger problem is that the privatization process has been conducted in an environment where there is no protection of property rights, regardless of whether state-owned or private property is in question. The takeover of the largest companies in Serbia was carried out with drastic violations of the rights of small shareholders, who have been trying for years to defend their rights through court cases. Equally affected have also been the rights of foreign investors whose interests happen to interfere with the interests of the colluded authorities and the big business in Serbia.

I shall mention only the case of the Investment Fund BRIEF TC form Luxembourg, which, in an auction in 2004, acquired the right to lease 15 hectares of land in which Luka Beograd owners are interested. Owing to the obstruction of state authorities in Serbia, so far BRIEF has not managed to realize its investment because of which it leased the land seven years ago, and because of that it filed a criminal complaint with the Special Prosecutor’s Office against Belgrade’s Mayor Dragan Djilas, five senior officials of the City of Belgrade and Milan Beko for crimes of the abuse of office and trading in influence. No legal action has been initiated yet in connection with this criminal complaint.

 Daniel Tost


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