Bosnia, corruption and state capture

Source: papatyayameftun/Pexels

Professor Robert Barrington and Berina Glusac from the Centre for the Study of Corruption’s MA in Corruption & Governance examine the political situation in Bosnia Herzegovina and look at the role that corruption has played in the crisis.

Unless you are a dedicated Balkans-watcher, you may well have missed the fact that Bosnia and Herzegovina (BiH) is amidst its biggest political crisis since the signing of the Dayton Peace Agreement in 1995.

Milorad Dodik, the Serb member of Bosnia’s complex tripartite presidential structure, declared in late 2021 that the Serb-run part of BiH, Republika Srpska (RS), would withdraw cooperation and involvement with key state-wide institutions, in violation of the 1995 peace agreements. He announced that the Bosnian judiciary, security, and intelligence organisations would no longer be allowed to operate in the RS, which would instead operate its own alternative structures.

Dodik makes no secret of the fact that this is a precursor to secession, although he claims it would be achieved by peaceful means. This naturally leads to a reflection on the heavy price that was paid during the war of the 1990s. In Europe’s bloodiest conflict since World War II, 100,000 people were killed and two million displaced. Over 8,000 Bosniak (Bosnian Muslim) men and boys were killed in the Srebrenica massacre alone in 1995. Thousands of bodies have still not been recovered three decades later; new mass graves are discovered each year, and most of the countryside remains covered with active land mines. The Genocide is relevant to the situation today; Dodik denies that such events took place and uses his control of the media to support his message. This plays strongly to his nationalist support base.

What has this do to with corruption? Quite a lot. Shortly after Dodik’s declaration, he was placed on a sanctions list by the US Treasury for ‘Destabilizing and corrupt activity.’ Like so many US announcements, this has produced a document that gives a useful read-out – presumably based on the US’s exceptional intelligence capabilities – of what Dodik has been up to. The main charges are the cronyistic allocation of public contracts and monopolies from whose proceeds Dodek dispensed bribes and patronage. The relevant wording of the US Treasury announcement is:

“Dodik is… responsible for or complicit in, or having directly or indirectly engaged in, corruption related to the Western Balkans. Specifically, he has established a patronage network in BiH from which he and his associates benefit. As one example of his corrupt actions, Dodik has provided government contracts and monopolies in the RS directly to close business associates. With his corrupt proceeds, Dodik has engaged in bribery and additional corrupt activities to further his personal interests at the expense of citizens in the RS.”

These mentions of other ‘corrupt activities’ hint that the US government has more information, but there is no fuller detail. More may emerge in due course, but for now it is enough to know that we must consider corruption to be part of this complex picture.

BiH’s circumstances are unique, and it would be unwise to extrapolate general lessons. However, this situation does illustrate some of the common elements of de-democratisation and state capture – albeit in this case, it is a geographical segment of the state that has been captured.

What we can see here is a politician using corruption both to strengthen his political position, and for personal financial benefit. In terms of state capture, there are some classic ingredients: First of all, a democratically-elected populist politician using nationalist messages and distorted truths to gain and maintain power; a deliberate attempt to dismantle or subvert key state institutions, including the judiciary; political power allocating control over state assets and resources; control over the media (the main television company is also placed on the US sanctions list), which is used to pump out fake news; and finally, a foreign policy that supports strongmen and oppressive regimes (in this case Serbia and Russia). To enrich himself and consolidate his power, Dodik uses patronage, cronyism and bribery.

In such a small country, this might pass unnoticed by the outside world were it not for two significant factors. First, there is a very real possibility of armed conflict and renewed genocide at the heart of Europe. Secondly, Russia’s invasion of Ukraine has made central European countries, and whether they support Russia, more strategically important to the EU and NATO.

Unfortunately, although the world has learned a great deal in the past thirty years about what does and does not work in tackling corruption, there is no established exit strategy from one of the biggest problems: state capture by populist nationalists. It is a gloomy picture, but sometimes internal or external pressures can help generate a rapid turnaround. In such circumstances, having a good problem analysis will be fundamental to finding solutions. One of the important aspects of such a problem analysis will be recognising, amidst the many other complexities, the role that corruption has been playing in the unfolding situation in Bosnia Herzegovina.

Can the law tackle contested appointments in the House of Lords?

Joseph Sinclair, a lawyer, research associate at Spotlight on Corruption, and recent alumnus of Sussex’s Corruption and Governance MA, writes about the recent controversy over Peter Cruddas’ appointment to the Lords and the shortcomings in the criminal laws that govern the purchasing of honours.

Image source: David Jakab/Pexels

Peter Cruddas: Appointment to the Lords & Controversy

In December 2020, the Prime Minister appointed Peter Cruddas to be a Conservative peer in the House of Lords. He is described on the Lords’ website as “a businessperson, philanthropist, and Conservative Party donor and former co-treasurer [of the Conservative Party]”. As a donor, he had given £50,000 to Boris Johnson for his 2019 leadership campaign and in total over £3m to the Conservative Party since 2007 (£1.2m since Boris Johnson became PM) as well as £1.5m to the Vote Leave campaign. Cruddas’ appointment was especially controversial because, after undertaking a vetting process, the House of Lords Appointment Commission had told the PM that they could not support the nominee.

Corruption in Romania and beyond: lessons from Colectiv

Photo credit: Radu Bercan/Shutterstock.com

Jerry Beere, who is currently taking the online Masters in Corruption & Governance course, looks at the film Colectiv, and what it can tell us about corruption in Romania and beyond – as well as the roles that film and art can play in communicating the complex causes and consequences of corruption.

What lessons can be learnt from Ireland’s lobbying regulation?

Megan Roe who is currently taking the Masters in Corruption & Governance at the Centre for the Study of Corruption, looks at what lessons the UK might learn from Ireland about the regulation of lobbying – an issue with particular relevance during the Covid-19 pandemic when government contracts and funds are awarded without the usual scrutiny and behind the scenes lobbying can produce an immediate financial reward.

When conducted in an appropriate way, lobbying plays an important role in the democratic process. But its often secretive nature, in combination with numerous political scandals across Europe, fuels perceptions of a shady world of influence peddling, where special interests are placed above the public good. Behind the scenes lobbying contains elements that Klitgaard’s ‘corruption formula’ (Corruption = Monopoly + Discretion – Accountability) suggests makes a favourable environment for corruption – in this case discretionary power without accountability. So in this regard, why is lobbying regulation so weak in so many countries?

Transparency, through a statutory lobbying register, is a way of improving perceptions of and limiting influence peddling. It puts back the accountability. The UK and Ireland both have registers of lobbyists, designed to increase the transparency. But even though the UK’s register was introduced a year before Ireland’s, the latter has received ten times more returns than the UK’s, and the UK’s register is strongly criticised by transparency campaigners. What does that tell us about good regulation in this area?

Ireland’s Regulation of Lobbying Act (2015) meant that from September 2015, those who lobby designated public officials (DPOs) are required to register and report their lobbying behaviour on a quarterly basis. The enforcement and investigative provisions of the Act came into force in January 2017, which helped fortify the 2015 law as one of the strictest lobbying regulations in the world. After a public consultation process, the Standards in Public Office Commissions introduced a Code of Conduct for lobbyists last year.

The essence of Ireland’s register is “to provide information to the public about who is lobbying whom about what.” The date and nature of all communications between lobbyists and DPOs are recorded – from meetings to tweets. The act itself employs one of the widest definitions of a lobbyist by international standards, and is easy to discern through the ‘Am I Lobbying?’ feature on the register’s website. Those within scope of the act include:

· Anyone who employs over 10 individuals

· A representative or advocacy body with one or more employees

· Professional lobbyists who are paid to communicate on behalf of a client

· Anyone communicating in regards to land development/zoning.

By comparison, the Association of Professional Political Consultants estimated that the UK register covers about one per cent of lobbying activity, contradicting the government’s statement that those unregulated under The Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Act (2014) were already covered under existing transparency measures.

Back in Ireland, failure to register leads to an automatic fixed penalty notice of €200, and more serious violations of the act may be punishable by a fine of up to €2,500 or a two-year prison sentence. Greater compliance with the Act enables the public and press to know who is lobbying, who is being lobbied, and to what end.

Another function of Ireland’s regulation is to impose a one-year ‘cooling off’ period for former DPOs who wish to engage in lobbying. The flow of powerful figures between government and industry is not limited to lobbying alone, but is a major part of the problem when we consider the access, influence, and sensitive information former public servants and politicians can offer those seeking to lobby the state. Conflict of interest risks are particularly high, and in some circumstances, industry leaders trade promises of future employment for regulatory allowances, making revolving doors criminally corrupt.

These post-employment restrictions are not perfect, as the Labour party and Transparency International Ireland initially sought to impose a two-year ‘ethical firewall’. Canada, which was very much the model for Ireland’s reforms, has a five-year cooling off period. In the UK, former ministers and senior crown servants are prohibited from lobbying government for two years, and are required to contact the Advisory Committee on Business Appointments (ACOBA) for advice on any appointments within this period. In practice, ACOBA has been described as ‘toothless’ in its regulation of revolving-door employment.

Ireland’s Head of Ethics and Lobbying Regulation stated in the Standards in Public Office Commission’s 2018 report that lobbying is still thriving in Ireland – rebutting ideas that stricter laws would have a damaging impact on lobbying. This is not just the view of politicians and campaigners, as the CEO of one of Ireland’s largest lobbying firms agrees that the act has not tied the hands of lobbyists, arguing “it’s always better in our industry to have transparency, we’re all stronger for it.” Opening the books on lobbying can limit the likelihood of inappropriate influence and corrupt exchanges, as the public are afforded greater scrutiny into the decision-making process.

In the UK, only consultant lobbying firms are required to register – not campaigning organisations or in-house lobbyists. Prior to the Lobbying Act, self-regulation was promoted through three British associations, and operated under a shared code of conduct. The government did not include this code or any other ethical framework in the statute, and there are no post-employment restrictions on former public office holders becoming lobbyists. According to Transparency International, it is important to address issues surrounding lobbying, the revolving door, and also party funding in the same breath as greater regulation in one area can easily lead corruption to flow into another.

The effectiveness of Ireland’s regulation lies in its five-point approach. It is one of the only EU members with a lobbying law, register, a cooling-off period for public servants, an ethical code of conduct, and sanctions in the form of monetary penalties and imprisonment. A comprehensive approach built upon these five key elements promotes transparency and accountability within lobbying processes. France and Slovenia also include many of these provisions under their lobbying legislation, while much of Europe lags in implementing a rigorous lobbying framework, if any regulation at all. The UK has fallen short on regulating a clandestine lobbying industry, but Ireland demonstrates that reform is possible.

CORRUPTION: When the Cheese Moved

John Githongo, CEO of Inuka Kenya and a prominent figure in the global anti-corruption movement, explains how the nature and definition of corruption have changed over the past two decades.  He examines the intersection between complex financial transactions, professional enablers and unaccountable tech companies and warns that these ingredients allied to the Covid-19 crisis create long-term corruption risks

I have been involved in anti-corruption work in media, government, the academy, civil society and the private sector for 23 years. I have watched the topology of graft change over this time. By the time Transparency International was founded in the early 1990s corruption in the public sector was a particular focus especially vis-à-vis its impact on development, democracy and a free and open society generally. This was driven largely by the fall of the Berlin Wall in 1989 and the fact that of some of the essential political tools of Cold War political competition and leadership were essentially redesignated as ‘corruption’. Dictators across the world complained about this dramatic shifting of the goal posts by their allies and patrons in the West. A wave of democratic reform swept across Africa and Latin America in particular. Anti-corruption was an essential part of the reform package. For a while the interests of billions of citizens in developing countries coincided with the liberal democracy promotion efforts of the West as the Soviet Union fell apart and China started its rise.

Three decades later I have come to believe that ‘corruption’ has changed dramatically. This change has been driven first by the scale of financialisation of the global economy that globalisation forged, and the intersection of this financialisation with digital technology. Secondly, the nature of corruption, crime and other illicit networks of principal actors in corrupt transactions has also been transformed. This transformation has outstripped the capacity of governments to keep pace with it – to oversee and regulate its assorted permutations. The traditional private sector that makes and sells things, the political class, bureaucracy and security services were essential components of corruption networks from the 1950s through to the early 1990s. By the mid-1990s globalisation and deregulation meant that the service and technology sectors were far more central to corruption networks than ever previously contemplated. Technology acted and continues to act as an accelerator of the changes.

Once commonly viewed as corruption ‘enablers’, the banking; accounting and audit; law; big tech companies; and, other service sector players had become far more essential to the corruption reality – their transactional infrastructure increasingly central to the design of complex illicit endeavours in the hyper-financialised era. By 2010 it had become clear, for example, that the profound concentration of these actors in a few tax havens had caused trillions of dollars and the dealings that underlay them, to be lifted away from the effective oversight of nation-states. As entire chunks of the work lawyers and auditors once did have been rendered redundant by technology these professions have increasingly morphed into highly specialised ‘advisors’ to finance. This has nuanced the definition of corruption from being the ‘abuse of vested authority for private gain’ to also being ‘the illegitimate transfer of economic surpluses from those without power to the few who wield it’.

Prior to the current COVID-19 economic disruption UNCTAD warned late last year that the threat of recession had been attenuated by ‘excessive financialisation’ of a fragile global economy. It called for a ‘new approach that would boost public investment with an eye to averting environmental breakdown and promote wage led growth in place of finance-led growth.’ By 2017, total developing country debt had reached its highest level on record at 190 percent of GDP, most of it private sector debt which has risen from 79 percent of GDP to 139 percent of GDP in 2017 . An April 2020 blog by Homi Kharas for the Brookings Institution argued that “Emerging markets and developing countries have about $11 trillion in external debt and about $3.9 trillion in debt service due in 2020. Of this, about $3.5 trillion is for principal repayments. Around $1 trillion is debt service due on medium- and long-term (MLT) debt, while the remainder is short-term debt, much of which is normal trade finance.” Needless to say some of the egregious corruption scandals in the developing world over the past decade have emerged out of the acquisition and theft of sovereign debt by corrupt elites in collaboration with the service sector in the West and Chinese state owned entities. This will likely continue and accelerate in the coming months as a result of the COVID-19 pandemic.

The first 20 years of anti-corruption research and advocacy saw considerable discussion of a national integrity system based very much on an institutional, legal and civic infrastructure informed by the value of transparency as a public good in a society that aspires to openness and equity. We’ve gone from advocating national integrity systems to realising that integrity cannot be digitised. Everyone from tax dodgers, the titans of digital technology whose business model does not anticipate great oversight and accountability because it is changing quicker than lawmakers can keep up with; the corrupt, organised crime, drug traffickers etc – are combining to change the rules of the game so that you don’t have to steal when global public relations, lobbying, legal, management consultancy, audit firms together form a bulwark with the power to amend the law so your unethical behaviour does not offend it.

Much corruption has effectively been legalised by the transfer of such a huge proportion of the transactions of financial intermediation being digitised. In South Africa, the term for this repurposing of governance institutions to serve private interests is state capture. In truth, its morbid symptoms in a variety of countries have been exposed by the media and data leaks with increasing frequency over the last 15 years. The Panama Papers, Paradise Papers, Malaysia’s IMDB scandal that cost US$4 billion, the 2014 scandal that led Ukraine’s President Victor Yanukovych to flee to Russia are examples. So is the fate of assorted Eurobond borrowing in a whole raft of developing countries where huge sums borrowed have been predated upon by venal elites confident that using sovereign bonds as instruments of theft in processes tightly managed by the financial services sector makes them immune to accountability.

The COVID-19 pandemic could be about to take this to the next level as digital solutions are proffered for education, commerce, manufacturing, even health and transport etc in an era where humans have temporarily become biohazards. The planet’s apex predator has bumped into a resilient viral opponent. Additionally, though a huge amount of money is about to be spent quickly saving economies from the devastating impact of the measures introduced to mitigate the pandemic. As is the case when massive responses are necessitated by major disasters this is often a recipe for ‘leakages’ caused by incompetence and outright corruption. The COVID-19 response will likely play out over a longer period making mitigation of these risks all the more urgent.

Strengthening electoral accountability is crucial in tackling corruption in the Western Balkans

In another take on flawed electoral accountability, Albana Shehaj (Postdoctoral Researcher at the Center for European Studies at Harvard University) argues that corrupt politicians are too easily able to use state resources to buy off voters. We should focus our efforts on constraining their ability to strategically allocate the spoils of corrupt office.

Tirana, Albania’s capital. Credits: Vladimir Tkalčić (CC BY-NC-ND 2.0)

Corruption has been a tenacious staple in the post-communist transition of the Balkan states and remains a grave threat to the region’s democratic consolidation. Corruption is substantial, frequent, and pervasive across the Western Balkan states of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia, with Transparency International Corruption Perceptions Index 2018 (CPI) scores ranging from 36 in Albania and North Macedonia (out of 100, where 0 is most corrupt and 100 least) to Serbia’s 39. That is considerably lower than Western Europe’s average CPI score of 66 and below the world’s average score of 43.

Whether presenting itself in the form of bribery, clientelism, embezzlement, or organized crime, corruption has consistently maintained its presence in the Western Balkans and increasingly permeated the very institutions established to control it, including law enforcement, the judiciary, legislature, and the presidency (Transparency International). In the case of Albania, the involvement of former Interior Minister Saimir Tahiri in a drug-trafficking network operating on both sides of the Albanian-Italian border points to the extent to which corruption permeates the country’s highest political and administrative structures. Albania’s current President, Ilir Meta also shares a political past marked by several allegations of official misconduct.

The chronic vulnerability of the Western Balkans makes the region a key target for human trafficking

Human trafficking by local and international criminal syndicates came to the Balkans during the wars in Bosnia and Herzegovina, Croatia and Kosovo during the 1990s. Tanya Domi (Adjunct Professor of International and Public Affairs at Columbia University) argues that an integrated approach is necessary to curb criminal activity and mitigate harm to migrants as they find their way to a new life.

One of the most notorious human trafficking cases in the Balkans involved a sex trafficking ring in Bosnia and Herzegovina (BiH) that was covered up by the leadership of the UN Mission. In 2001, an American police monitor serving in the UN Mission blew the whistle on a group of Americans serving in the International Practices Task Force (IPTF) Mission: she was summarily terminated for reporting the crime.

I broke this story and approached Bosnian newspaper Oslobođenje, the longest operating daily newspaper in BiH, which agreed to publish it. The horrible irony of these crimes was underlined by the fact that they occurred in Bosnia, where women bore the brunt of a brutal war that known for the mass rape of Bosniak women as a tool of ‘ethnic cleansing.’

North Macedonia’s experience in trying to dismantle state capture: policy must be backed by research

Writing about North Macedonia’s experience in addressing pervasive grand corruption as exposed by leaked tapes in 2015, Misha Popovikj (Institute for Democracy Societas Civilis, Skopje) argues that efforts to dismantle state capture should be preceded by a thorough diagnosis of the problems.

Protesters in Skopje, April 2016. The demonstrations over widespread corruption eventually led to the fall of VMRO-DPMNE’s decade-long rule. Credits: Vanco Dzambaski (CC BY-NC-SA 2.0)

Back in 2015, European Commission adviser Reinhard Priebe and his team of rule of law experts arrived in North Macedonia amidst a political crisis. That same year, the Macedonian political opposition had revealed audio recordings carried out illegally by the secret police, and uncovered mass corruption and abuse of office. Priebe’s task was to provide the European Union with a quick assessment and recommendations on urgent reform priorities in relevant areas – corruption in the judiciary, politicised administration, media clientelism, and the uneven playing field in electoral competition.

In June 2015, he delivered a document that set future benchmarks for assessing the readiness of the country to start the EU accession process. Shortly afterwards, a group of NGOs begun transforming these recommendations into specific reforms. The idea was to set a ‘Blueprint‘ – a guide of sequenced changes achievable within 12 months. The Social Democrats, then in opposition, vowed to include these recommendations in their reforms should they win a majority in the 2016 elections.

Widespread aspirations to join the EU provided leverage to these proposals. Priebe’s recommendations were, in essence, new conditions set by the European Commission for accession. The Blueprint reforms were backed by foreign embassies in the country.

In Kosovo, journalists and civil society beat organised crime by getting more organised

Recent elections in Kosovo saw the opposition defeat long-standing incumbents, electing a new generation with fresh talent and integrity. Jeta Xharra (Balkan Investigative Reporting Network) explains the role that civil society played in making it happen.

Vetëvendosje (LV), winners of the biggest share of votes at Kosovo’s October 2019 election (balkaneu.com).

It is a rare moment in the recent history of Kosovo that I can report that the narrative of civil society, investigative journalists and anti-corruption activists has won, against the narrative of those who we exposed.

Usually we tell our story, we probe, reveal, prove, document, publish, broadcast, file complaints, and we get read, seen, talked about, commented on. But there it ends. It is rare that our anti-corruption narrative becomes mainstream and brings about change.

This is because the opposing narrative, that of the state, has a bigger budget, more power, more police, more prosecutors, more judges, more spin-doctors on their side and more paid ‘journalists’ who toe their line. And the state usually plays the nationalist card to further capture the public imagination.

Can the European Union tackle corruption and state capture?

While the EU is far from a silver bullet, Dimitar Bechev argues that it is still a badly-needed ally in strengthening the rule of law in the Balkans. But for enlargement to make good on its original promise, the EU should take a robust stance and call out egregious cases of corruption. 

European Union Balloons, by Jonatan Svensson Glad (CC BY-SA 2.0)

When it set to enlarge in the 1990s, the EU brought forward three promises to Eastern Europe. First, delivering prosperity which would narrow the gap with the advanced countries in the West. Second, cementing peace and stability in a historically volatile part of the Old Continent at a time when Yugoslavia went down in flames. Third, Europe was all about good governance and the rule of law. Post-communist societies needed external help and encouragement to consolidate independent judiciaries, establish robust anti-corruption agencies, depoliticize and upgrade the civil service, foster a vibrant NGO scene and media capable of holding the powers to be to account.

When the EU enlarged in 2004, the prevailing sentiment was that this third goal had been fulfilled. Central Europe (Slovenia included) and the Baltics met all the benchmarks. Romania and Bulgaria, on the other hand, were an entirely different kettle of fish. While they did make it into the Union in 2007, the accession treaties empowered the European Commission to monitor judicial reforms and issue regular reports, as during the pre-accession period. The so-called Cooperation and Verification Mechanism (CVM) meant to give the EU leverage to take care of “unfinished business”.

In parallel, lessons learned from the Romanian and Bulgarian case fed into the design of accession negotiations with the Western Balkans: Croatia and, later on, Montenegro and Serbia. The much-discussed Chapters 23 and 24 (addressing the judiciary and the rule of law) offered a means to maximize pressure on governments to meet EU-set benchmarks in rooting out corruption in high places, not a trivial goal given the difficult legacy bearing on former Yugoslav republics as well as on Albania.

What has happened in the 15-odd years since? The record is at best chequered. The former star pupils have turned into the EU’s worst headache. Back in the day, one could simply write off Bulgaria or Romania as the outliers. But when Hungary and Poland have become textbook examples of state capture through dismantling the very checks and balances that make democracy worthy of its name and ensure transparency and accountability of decision making, it is painfully clear that the vision of Europeanization is in dire straits.